Board of Directors - Spire Healthcare Group plc · PDF fileBoard of Directors 1. Garry Watts EC D N Executive Chairman ... EMI Group plc and Gallaher Group plc. John was also a non-executive

Board of Directors

1. Garry Watts C D E N

Executive ChairmanGarry Watts joined the Group as Executive Chairman in 2011 before becoming Non-Executive Chairman between Admission and March 2016. He resumed the role of Executive Chairman in March 2016. The Company does not consider Garry to be independent due to his executive role.

Current external appointments• chairman of BTG plc• chairman of Foxtons Group plc• non-executive director of Coca-Cola

European Partners Ltd

Skills and previous experienceA chartered accountant by profession and former partner at KPMG, Garry’s extensive business knowledge and leadership on other listed company boards, including SSL International plc and Celltech Group plc, has ensured a seamless transition from private to public for the Company. He has a deep understanding of the healthcare sector, having served as a member of the UK Medicines and Healthcare Products Regulatory Agency Supervisory Board for 17 years. Garry was also previously an executive director of Medeva plc, deputy chairman of Stagecoach Group plc and a non-executive director of Protherics plc.

2. Andrew White Executive DirectorAndrew White joined Spire Healthcare in November 2015 and served as Chief Operating Officer until December 2016. He was appointed an Executive Director in July 2016. Andrew is expected to be appointed the Company’s new Chief Executive Officer once he has recovered from a period of sustained medical treatment. He remains engaged with the business in his capacity as a Director whilst temporarily stepping down from all Board and management committees.

Skills and previous experienceAndrew began his working life in the Royal Electrical and Mechanical Engineers and served in Bosnia, Northern Ireland and the first Gulf War. After leaving the army in 1995, Andrew held senior positions at Serco plc and Nomura Principal Finance Group and later Serco Nomura Infrastructure Fund. Andrew became CEO of Serco UK&E Local & Regional Government division in January 2014 where he was responsible for all aspects of Serco’s business in the UK and Europe.

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Board committee membership: A Audit and Risk CommitteeC Clinical Governance and Safety CommitteeD Disclosure CommitteeN Nomination CommitteeR Remuneration Committee

Committee Chair

Management committee membership: E Executive Committee

Committee Chair

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Andrew is an ambassador to the National Apprenticeship Service and has been the industry chair of the Defence Suppliers Forum Executive Group. He attended the Advanced Management Program at Harvard Business School in 2013.

3. Simon Gordon D E

Chief Financial Officer Simon Gordon joined Spire Healthcare as Chief Financial Officer in July 2011 and became an Executive Director of the Company in June 2014.

Skills and previous experienceSimon has a broad range of financial experience and brings invaluable knowledge of both audit and transaction advisory projects for both listed and private companies to the role. He qualified as a chartered accountant with KPMG before spending eight years as group finance director of Virgin Active. During his time at Virgin Active, the business grew from break-even to £150 million EBITDA, operating in five countries. This growth was achieved by a successful combination of organic development and acquisition.

4. John Gildersleeve N R

Deputy Chairman and Senior Independent DirectorJohn Gildersleeve was appointed the Deputy Chairman and Senior Independent Director in June 2014. John has indicated his desire to retire from the Board and will do so by the annual general meeting in 2017.

Current external appointments• chairman of The British Land Company plc• deputy chairman of TalkTalk Telecom

Group plc

Skills and previous experienceJohn is an experienced executive with strong operational expertise from a number of listed companies and is a skilled nomination committee chair. He served as an executive director of Tesco PLC and was formerly chairman of Carphone Warehouse Group plc, EMI Group plc and Gallaher Group plc. John was also a non-executive director of Dixons Carphone plc, Lloyds TSB Bank plc, Pick N Pay Stores Limited (South Africa) and Vodafone Group plc.

5. Dame Janet Husband A C N Independent Non-Executive DirectorDame Janet Husband was appointed an independent Non-Executive Director in June 2014.Current external appointments• Emeritus Professor of Radiology at the

Institute of Cancer Research• non-executive director of Royal Marsden

NHS Foundation Trust

Skills and previous experienceHaving trained in medicine at Guy’s Hospital Medical School, Dame Janet’s extensive career in healthcare allows her to bring invaluable insight and knowledge of the healthcare industry. She has previously served as a specially appointed commissioner to the Royal Hospital Chelsea, was president of the Royal College of Radiologists, chaired the National Cancer Research Institute in the UK and was a non-executive director of Nuada Medical Group. Dame Janet was appointed as Professor of Diagnostic Radiology at the University of London, Institute of Cancer Research, in addition to more than 30 years as a practising consultant radiologist at the Royal Marsden Hospital.

6. Tony Bourne A C R Independent Non-Executive Director Tony Bourne was appointed an independent Non-Executive Director in June 2014.

Current external appointments• non-executive director of Barchester

Healthcare Limited• non-executive director of Bioquell Plc• non-executive director of Totally plc

Skills and previous experienceTony brings considerable knowledge of the healthcare industry to his role, having been chief executive of the British Medical Association for nine years until 2013. Prior to this, he was in investment banking for over 25 years, including as a partner at Hawkpoint and as global head of the equities division and a member of the managing board of Paribas. Tony has also previously served as a non-executive director of Southern Housing Group, and the charity, Scope.

7. Adèle Anderson A R

Independent Non-Executive DirectorAdèle Anderson was appointed an independent Non-Executive Director in July 2016.

Current external appointments • non-executive director and chair of the audit committee of easyJet plc

• non-executive director and chair of the audit committee of intu properties plc

• member of the board of trustees of Save the Children UK

• member of the audit committee of the Wellcome Trust

Skills and previous experienceAdèle has gained extensive financial experience throughout her career and has significant knowledge of audit committees. Until July 2011, she was a partner in KPMG LLP and held a number of senior roles across their business including Chief Financial Officer of KPMG UK, Chief Executive Officer of KPMG’s captive insurer and Chief Financial Officer of KPMG Europe.

8. Simon Rowlands Non-Executive DirectorSimon Rowlands was appointed a Non-Executive Director in June 2014, although he served in a similar capacity prior to Admission having been an appointment of Cinven, the Company’s former principal shareholder. The Company does not consider Simon to be independent due to the senior position he continues to hold with Cinven Partners.

Current external appointments• senior adviser to Cinven Partners• non-executive director of Avio S.P.A. (Italy)• non-executive director of MD Medical

Group Investment plc• founding partner of Africa Platform Capital

Skills and previous experienceSimon’s extensive knowledge of the Company and its markets, combined with his wise counsel over a number of years, were among the reasons he was asked to continue to serve as a member of the Board following Cinven’s sale of their shareholding. He was a founding partner of the private equity firm Cinven until 2013, and established and led its healthcare team. Simon founded a new private equity firm in 2016 focused on healthcare and consumer sectors of Sub Sahara Africa. Prior to joining Cinven, he worked with an international consulting firm on multidisciplinary engineering projects in the UK and southern Africa.

9. Danie MeintjesNon-Executive DirectorDanie Meintjes was appointed as a Non-Executive Director in August 2015. The Company does not consider Danie to be independent as he has been appointed to the Board by the Company’s principal shareholder, Mediclinic International PLC, under the terms of the relationship agreement with them.

Current external appointments• chief executive officer of Mediclinic

International PLC

Skills and previous experienceDanie joined the Mediclinic International group in 1985, were he has held a number of senior positions. He was appointed as a director of Mediclinic International Limited (South Africa) in 1996 and then became its chief executive officer in April 2010. Danie holds a Bachelor of Personnel Leadership from the University of the Free State (South Africa) and has also attended the Advanced Management Program at Harvard Business School.

55Spire Healthcare Group plc Annual Report 2016

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FINANCIAL STATEMENTS

SHAREHOLDER INFORMATION

Senior leadership team

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1. Catherine MasonChief Operating Officer E

Catherine Mason joined Spire Healthcare in December 2016. Prior to that, she spent the first half of her career in consumer goods, then made the transition to transport, and latterly moved to healthcare.

Following a degree in genetics, Catherine worked in marketing in blue chip companies on brands such as Ribena, Lucozade and Clover. Following an MBA at Henley Management College, she made the progression to transport – initially working for Arriva in a commercial capacity then moving into operational roles in bus and rail.

Catherine was appointed group chief executive of Translink in 2008 where she oversaw public transport in Northern Ireland, and then became managing director of NATS Services in 2014. In 2016, she made the transition to the independent healthcare sector when she was appointed chief executive of Allied Healthcare.

Catherine is a chartered director, a fellow of the Institute of Directors, and a fellow and former vice president of the Chartered Institute of Logistics and Transport.

2. Dr Jean-Jacques de GorterGroup Medical Director E

Dr Jean-Jacques de Gorter joined Bupa Hospitals as director of clinical services in 2005 before being appointed Spire Healthcare’s Group Medical Director. He is responsible for driving the Group’s clinical governance and quality strategy. Prior to joining Bupa Hospitals he served as a medical director for NHS Direct.

Jean-Jacques is a non-executive director at the Milton Keynes University Foundation Trust and chairs its Quality Committee. Jean-Jacques graduated with a Bachelor of Medicine and Bachelor of Surgery from Charing Cross and Westminster Medical School, practised in the UK, Australia and New Zealand and subsequently completed his MBA degree at Cranfield School of Management.

Board committee membership: D Disclosure Committee

Management committee membership: E Executive Committee member

Committee Chair


GOVERNANCE: SENIOR LEADERSHIP TEAM

3. Peter CorfieldGroup Commercial Director E

Peter Corfield joined Spire Healthcare in October 2015 as Group Commercial Director and has responsibility for delivering revenue growth through our three payor groups and identifying new business opportunities.

Prior to joining Spire Healthcare, he held a number of senior executive and board roles within the financial services industry in the UK, most recently as managing director of Ageas Retail Direct. Prior to this, Peter worked for both Zurich Financial Services Group and Royal Bank of Scotland in various roles that covered Europe, Middle East and Japan.

4. Neil McCulloughBusiness Development Director E

Neil McCullough joined Spire Healthcare on its formation in 2007 as Hospital Director at Spire Cambridge Lea Hospital before joining the executive team in 2011. In his role, Neil oversees Spire Healthcare’s business development strategy both at the local hospital level and corporately.

Following an early career in accounting and finance, Neil moved into healthcare in 1993 working with Bupa UK Membership, where he held a number of senior sales and relationship management roles. He joined the Bupa Hospitals business in 1998, holding hospital general manager roles in both Birmingham and East Anglia. Neil then moved into preventative healthcare with Bupa Wellness in 2002, where, as sales director, he led the rapid expansion of the business for five years.

5. Daniel TonerGeneral Counsel and Group Company Secretary D E Daniel Toner joined Bupa Hospitals as head of legal in 2006 before being appointed General Counsel and Group Company Secretary upon Spire Healthcare’s formation in 2007 and is a solicitor by profession. He oversees all legal activity at Spire Healthcare, ensures compliance with statutory and regulatory requirements, and that decisions of the Board of Directors are realised. Daniel is also the Company’s Whistleblowing Officer and Freedom to Speak Up Guardian.

Daniel is a director of NHS Partners Network, an organisation that represents independent sector organisations that provide NHS services. Previously, he worked for international law firm Freshfields Bruckhaus Deringer, in industry and within the commercial directorate of the Department of Health.

6. Antony MannionDirector, Strategy and Investor Relations D E Antony Mannion joined Spire Healthcare as Investor and Public Relations Director in March 2012, having spent seven years at SSL International plc, until its acquisition by Reckitt Benckiser Group plc in 2010, as group legal director and head of acquisitions.

Prior to SSL International plc, Antony worked as a corporate lawyer at Freshfields in London and Paris, then as an investment banker at Citicorp in London and New York, and at Standard Chartered in Singapore. Antony has a wide range of experience in all areas of corporate finance, and has worked on significant acquisition and IPO transactions in both the UK and overseas.

7. Caroline RobertsGroup Human Resources DirectorCaroline Roberts joined Spire Healthcare as Group Human Resources Director in September 2015 to develop and implement the Company’s HR strategy for growth. In her role, Caroline oversees all aspects of frontline services including employment and welfare, training, education and financial advice.

Caroline has experience in a variety of sectors under public, private and private equity ownership with significant international exposure. She has held a number of senior executive and board roles, most recently as group HR director at Action For Employment Ltd. Prior to this, Caroline worked for The Royal Mint, Terra Firma Capital Investors and British Airways Plc.


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Senior Independent Director’s governance letterI would like to take the opportunity to assure shareholders that, despite the leadership changes made during the year, the Board remains committed to applying the highest standards of corporate governance across the Group.

Dear Shareholder,

Executive ChairmanFollowing Rob Roger’s notification that he intended to step down as Chief Executive Officer, the Board unanimously agreed that Garry Watts should resume the role of Executive Chairman. This was not a decision taken lightly but was seen as providing vital continuity at the head of the Company while a successor to Rob was identified. Harnessing Garry’s knowledge of the Company and many years of leadership experience has been particularly important over the short term.

This has meant that my role and that of the other Non-Executives has become even more important to ensure enhanced scrutiny and challenge.

Changes to your Board and senior managementThe table on page 59 summarises the changes to the Board made during 2016.

I would like to take this opportunity to thank both Robert Lerwill and Rob Roger for their sterling contributions to the Company. Robert expertly chaired our Audit and Risk Committee from Admission before his unanticipated departure from the Board. Rob was with the business for over nine years and in that time saw the business grow significantly under Cinven’s ownership and become fully listed in 2014.

We were delighted to welcome Adèle Anderson to the Board in July and recognise the considerable experience she brings.

John Gildersleeve Deputy Chairman and Senior Independent Director


GOVERNANCE: SENIOR INDEPENDENT DIRECTOR’S GOVERNANCE LETTER

In December, the Board announced the appointment of Catherine Mason as Chief Operating Officer succeeding Andrew White in that position. At the same time it indicated its expectation that Andrew White would become the next Chief Executive Officer once he had recovered from a sustained period of medical treatment. At the time of writing, Andrew continues with his treatment whilst remaining engaged with the business in his capacity as a Director of the Company.

Governance Arising from the Board changes, the Company did not comply with some aspects of the UK Corporate Governance Code, usually on a very short-term basis during the year. You can read further about these non-compliances and the Board’s responses on page 60.

Again, I would like to take this opportunity to assure shareholders that your Board takes the matter of governance extremely seriously and continues to perform well with the Non-Executive Directors all providing extensive challenge to management.

2016 performance evaluationDuring the second half of 2016, the Board completed its second formal performance evaluation. The evaluation process was led by the Executive Chairman, with support from the Group Company Secretary, and consisted of a questionnaire that covered areas including strategy, Board and management succession, Board culture, balance and diversity, meetings and processes, investor relations, decision-making, risk management and Board committees. I separately led the review of the Executive Chairman’s performance in conjunction with the other Non-Executive Directors.

The principal conclusions were presented and discussed at our meeting in November. It was determined that the Company’s Board was operating effectively in an open and transparent manner, providing support and challenge to senior management. A fuller review of the results and our agreed action plan can be found on page 63 as well as an update on the actions identified from our first evaluation. The Board will use the services of an independent third party to facilitate its evaluation in 2017.

Risk management and corporate cultureOur risk culture is centred on risk awareness, openness, continuous improvement and encouraging the right behaviour to ensure an appropriate outcome for both the Company and its customers.

Annual general meetingFinally, the Board looks forward to meeting as many shareholders as possible at our annual general meeting which will be held at 11.00am on Friday, 26 May 2017 at the offices of J.P. Morgan, 60 Victoria Embankment, London EC4Y 0JP.

John Gildersleeve Deputy Chairman and Senior Independent Director1 March 2017

Changes to your BoardIndividual Event Date

Garry Watts Resumed Executive Chairman role on announcement of Rob Roger’s intended departure 14 March 2016

John Gildersleeve Notified Company of intention to step down as Deputy Chairman and Senior Independent Director 18 May 2016

Robert Lerwill Stepped down as a Non-Executive Director with immediate effect 27 June 2016

Rob Roger Stepped down as Chief Executive Officer 30 June 2016

Andrew White Appointed an Executive Director 1 July 2016

Simon Rowlands Appointment as a Non-Executive Director renewed for a further year 23 July 2016

Adèle Anderson Appointed an independent Non-Executive Director 28 July 2016


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Corporate governance

Compliance with the UK Corporate Governance Code in 2016The UK Corporate Governance Code provides the standard for corporate governance in the UK. The Financial Conduct Authority requires listed companies to disclose whether they have complied with the provisions of the UK Code throughout the financial year under review.

The Company has complied with the principles (and code provisions) of the UK Corporate Governance Code issued in September 2014 (the ‘UK Code’), throughout the year except as shown in the following table.

UK Code provision How has the Company not complied with the provisions of the UK Code? The Board’s response

A.2.1 From 1 July 2016, the roles of chairman and chief executive have been exercised by Garry Watts.

The Company will look to return to a position where the roles of chairman and chief executive officer are exercised by two individuals as soon as practicable. The Board has announced its intention to appoint Andrew White as Chief Executive Officer on his full recovery from a period of sustained medical treatment.

A.3.1 Garry Watts was not independent on appointment to the Board having previously served as Executive Chairman of the Company prior to IPO.

The Non-Executive Directors have determined that Garry Watts continues to lead the Board effectively.

B.1.2 Between Robert Lerwill’s resignation on 27 June 2016 and the appointment of Adèle Anderson as an independent Non-Executive Director on 28 July 2016, less than half of the Board, excluding the Executive Chairman, comprised Non-Executive Directors determined by the Board to be independent.

Robert Lerwill’s departure from the Board was unanticipated and regretful. Steps were taken to address the position as soon as practicably possible.

The Company fully complied with each of these provisions outside of this short period and continues to do so up to the date of this report.

The members of the Audit and Risk Committee and Remuneration Committee did not meet during these short periods.

C.3.1 Between Robert Lerwill’s resignation on 27 June 2016 and the appointment of Adèle Anderson as chair of the Audit and Risk Committee on 28 July 2016, the Company’s Audit and Risk Committee did not have three members or a member designated as having recent and relevant financial experience.

D.2.1 Between Robert Lerwill’s resignation on 27 June 2016 and the appointment of Adèle Anderson as a member of the Remuneration Committee on 24 August 2016, the Company’s Remuneration Committee did not have three members.

E.2.3 Robert Lerwill, who was chair of the Audit and Risk Committee at the time, was unable to attend the Company’s annual general meeting on 19 May 2016 due to illness.

This was unfortunately an unavoidable occurrence. It is intended that the full Board attend the annual general meeting on 26 May 2017 when they will all be available to shareholders.


GOVERNANCE: CORPORATE GOVERNANCE

• Simon Rowlands continues to hold a senior position with the Company’s former principal shareholder, Cinven; and

• Danie Meintjes has been nominated to act as a Non-Executive Director by Mediclinic International PLC, the principal shareholder, whose subsidiary, Mediclinic Jersey Limited (formerly Remgro Jersey Limited), entered into a relationship agreement with the Company in June 2015 (the ‘Relationship Agreement’). Under the terms of the Relationship Agreement, when Mediclinic International PLC controls 15% or more of the votes, it will be entitled to appoint one Non-Executive Director to the Board. It controls 29.9% of votes as at 1 March 2017. The Directors believe that the terms of the Relationship Agreement will enable the Group to carry on its business independently of Mediclinic International.

The Board considers that, excluding the Executive Chairman, half of the Board is independent of management and free from any business or other relationship that could affect the exercise of their independent judgement.

Conflicts of interest Save as set out in the table below, there are no actual or potential conflicts of interest between any duties owed by the Directors or senior management to the Company and their private interests or other duties. The Board will continue to monitor and review potential conflicts of interest on a regular basis.

Director Conflict

Danie Meintjes Chief executive officer of Mediclinic International PLC, which controls 29.9% of the voting rights in the Company as at 1 March 2017.

Director independenceIndependence is determined by ensuring that, apart from receiving their fees for acting as directors or owning shares, Non-Executive Directors do not have any other material relationship or additional remuneration from, or transactions with, the Group, its promoters, its management or its subsidiaries, which in the judgement of the Board may affect, or could appear to affect, their independence of judgement.

As the Executive Chairman acts in an executive capacity he is not considered to be independent. He also did not satisfy the independence criteria on his appointment to the Board. In addition, the Company does not consider the following two Non-Executive Directors to be independent for the reasons given:

Key roles and responsibilities

Garry Watts Executive Chairman

John Gildersleeve Deputy Chairman and Senior Independent Director

Daniel TonerGeneral Counsel and Group Company Secretary

The Executive Chairman leads the Board and is responsible for:

• the leadership and overall effectiveness of the Board;

• a clear structure for the operation of the Board and its committees;

• setting the Board agenda in conjunction with the Group Company Secretary and Chief Executive Officer;

• ensuring that the Board receives accurate, relevant and timely information about the Group’s affairs; and

• In addition, whilst the Company does not have a Chief Executive Officer, the Executive Chairman, together with the Chief Financial Officer and the Chief Operating Officer, is responsible for:

− developing the Group’s strategic direction for consideration and approval by the Board;

− day-to-day management of the Group’s operations;

− the application of the Group’s policies;

− the implementation of the agreed strategy; and

− being accountable to, and reporting to, the Board on the performance of the business.

The Board nominates one of the independent Non-Executive Directors to act as Senior Independent Director. He is responsible for:

• being an alternative contact for shareholders at Board level other than the Chairman;

• acting as a sounding board for the Chairman;

• if required, being an intermediary for Non-Executive Directors’ concerns;

• undertaking the annual Chairman’s performance evaluation; and

• when required, leading the recruitment process for a new Chairman.

The Group Company Secretary supports the Executive Chairman on Board corporate governance matters. He is responsible for:

• planning the annual cycle of Board and committee meetings and setting the meeting agendas;

• making appropriate information available to the Board in a timely manner;

• ensuring an appropriate level of communication between the Board and its committees;

• ensuring an appropriate level of communication between senior management and the Non-Executive Directors;

• keeping the Board apprised of developments in relevant legislative, regulatory and governance matters; and

• facilitating a new director’s induction and assisting with professional development, as required.


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The independent Non-Executive Directors oversee the adequacy of the risk management and internal control systems (from their membership of the Audit and Risk Committee and Clinical Governance and Safety Committee (‘CGSC’)), as well as the remuneration for the Executive Directors (from their membership of the Remuneration Committee).

As members of the Nomination Committee, the Non-Executive Directors also play a pivotal role in Board succession planning and the appointment of new Executive Directors.

Your Board in 2016During the year, the Board met on nine occasions and Director attendance is shown on page 65.

The agenda at scheduled meetings in 2016 covered standing agenda items, including: a review of the Group’s performance by the Chief Executive Officer or Chief Operating Officer, the current month’s and year to date financial statistics by the Chief Financial Officer and a review of clinical performance. In addition, the Board received a verbal report from committee chairs, where their committee met immediately in advance of the scheduled Board meeting, and the Board regularly received reports on legal and statutory matters.

Also in 2016, the Board focused on major elements of the Group’s operations by:

• reviewing, and approving, the Group’s three-year Strategic Plan;

• reviewing progress on the two new hospital developments at Manchester and Nottingham; and

• receiving, reviewing and approving other major capital expenditure proposals.

The Board has a formal schedule of matters reserved to it and delegates certain matters to committees. Specific matters reserved for the Board considered during the year to 31 December 2016 included reviewing the Group’s performance (monthly and year to date), approving capital expenditure, setting and approving the Group’s strategy and annual budget.

Board and Committee structureUltimate responsibility for the management of the Group rests with the Board of Directors.

The Board focuses primarily upon strategic and policy issues and is responsible for:

• leadership of the Group; • implementing and monitoring effective

controls to assess and manage risk;• supporting the senior leadership team to

formulate and execute the Group’s strategy;• monitoring the performance of the Group;

and• setting the Group’s values and standards.

There is a specific schedule of matters reserved for the Board.

The Executive Chairman and the Chief Executive OfficerBetween 1 January 2016 and 30 June 2016, the Company had set out in writing a division of responsibilities between the Executive Chairman, Senior Independent Director and the Chief Executive Officer.

Since 1 July 2017, the Executive Chairman has performed the role of the Chief Executive Officer.

The Non-Executive DirectorsThe Non-Executive Directors bring a wide range of skills and experience to the Board. The independent Non-Executive Directors represent a strong, independent element on the Board and are well placed to constructively challenge and support management. They help to shape the Group’s strategy, scrutinise the performance of management in meeting the Group’s objectives and monitor the reporting of performance.

Their role is also to satisfy themselves with regard to the integrity of the Group’s financial information and to ensure that the Group’s internal controls and risk management systems are robust and defensible.

The Board’s plan for 2017It is planned that the Board will convene on eight formal scheduled occasions during 2017, as well as holding any necessary ad hoc Board and committee meetings to consider non-routine business.

The Senior Independent Director and the other Non-Executive Directors will meet on their own without the Executive Directors present. In addition, the Non-Executive Directors will also meet without the Executive Chairman present to discuss matters such as the Executive Chairman’s performance.

The Board will maintain its focus on the Group’s pursuit of its 2017 targets and also review succession planning during the year. Its activities will include:

• review the roles of the Executive Chairman and Executive Directors;

• review and approve the 2016 Annual Report;

• review the proposed final dividend for 2016;

• approve the 2017 Annual Operating Plan; • consider specific major themes;• embed the risk management framework;

and• follow a rolling agenda, ensuring proper

time for strategic debate.

Furthermore, the Board will continue to consider clinical safety matters and maintain overall responsibility for the Group’s system of internal control and risk management processes via the relevant Board committees.



Share Schemes CommitteeIn addition, the Board delegates certain responsibilities in relation to the administration of the Company’s share schemes on an ad hoc basis to the Share Schemes Committee. This committee operates in accordance with the delegation of authority agreed by the Board.

Disclosure CommitteeWith the implementation of the EU’s Market Abuse Regulations in 2016, the Board established a Disclosure Committee to ensure, under delegated authority from the Board, that the Company complies with its disclosure obligations, specifically under the Market Abuse Regulation and related legislation. The Disclosure Committee also manages the Company’s share dealing code, ensuring colleague compliance and provides training where required. The members of the Disclosure Committee are disclosed below.

Executive CommitteeThe Executive Committee meets on a monthly basis. It is supported by the Operating Board and Safety, Quality and Risk Committee who have specific focus on operational and safety matters respectively.

Board evaluation2016 Action plan updateThe 2015 Board evaluation identified three principal areas of focus and associated actions to address them during 2016.

Area of focus Actions Progress

1) Risk management

• Address resourcing for the internal risk function.• Continue to develop risk reporting and the risk

register to ensure the Board has adequate oversight of risk management and risk appetite.

The Group appointed a Head of Group Risk in November 2015 who has taken a ‘bottom up’ approach to risk identification across the business. The findings of their review have been reported to the Executive Committee, Audit and Risk Committee and the CGSC, and further updates on embedding risk management will be provided in 2017.

The Audit and Risk Committee reviewed the need for an internal audit function in 2016 and agreed that an appropriate structure should be formalised. The Audit and Risk Committee agreed an assurance programme for 2017 at their November meeting.

Due to the importance of risk identification and reporting to both the business and Directors this area of focus will be carried forward to next year’s Board evaluation action plan.

2) Succession planning

• Increase focus on matching succession and development to the strategic challenges of the business and the next decade of challenge it faces.

• Discuss succession planning for Executive Directors at the Nomination Committee.

Succession planning was of particular focus following Rob Roger’s decision to leave the business and the Board gave considerable consideration to the position of Chief Executive Officer before agreeing on the appointments it has made.

3) Non-Executive Directors

• Continued familiarisation of the business including developing a co-ordinated hospital visits.

• Hold one Board meeting at a hospital in 2016.• Create greater interaction with the executive

at all levels in order to further enhance the Board’s understanding of the business beyond presentations at Board meetings.

A change of plans meant that it was not possible to arrange a meeting at a hospital during the year but the Board will visit the new Spire Manchester Hospital in July 2017. Those Non-Executive Directors on the CGSC regularly visit hospitals as part of that committee’s agreed schedule.

Directors have had increased visibility of and interaction with the senior leadership team.

Action plan for 2017Area of focus Actions

1) Risk management • Continue to develop risk reporting, especially clinical, and the risk register to ensure the Board has adequate oversight of risk management and risk appetite.

• Develop the relationship and interaction between the Audit and Risk Committee and CGSC.• Discuss and understand the Board’s risk appetite.

2) Board composition • Appoint a strong Senior Independent Director to replace John Gildersleeve when he leaves the Board.• Review the roles of the Executive Chairman and Executive Directors.

3) Strategy • Provide a mid-year strategy session update to the Board on progress made.


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Executive CommitteeThe Group also operates an Executive Committee (convened and chaired by the Executive Chairman). The team generally meets monthly as operational activities allow and its members are shown on pages 54 to 57.

Key objectives:• assists the Executive Chairman in discharging his responsibilities;• ensures a direct line of authority from any member of staff to the Executive

Chairman; and• assists in making executive decisions affecting the Company.

The Board of Spire Healthcare Group plcThe Board comprises nine Directors – the Executive Chairman, two Executive Directors and six Non-Executive Directors, four of whom are deemed to be independent for the purposes of the UK Code. Daniel Toner serves the Board as General Counsel and Group Company Secretary.

Key objectives:• leads the Group;• oversees the Group’s system of risk management and internal controls;• supports the Executive Committee to formulate and execute the

Group’s strategy;• monitors the performance of the Group; and• sets the Group’s values and standards.

Governance framework in 2016

Clinical Governance and Safety CommitteeDame Janet Husband (chair), Tony Bourne, Garry Watts, Andrew White

Key objectives:• promotes, on behalf of the

Board, a culture of high-quality and safe patient care;

• monitors specific non-financial risks and their associated processes, policies and controls: (i) clinical and

regulatory risks;(ii) health and safety; and (iii) facilities and plant.

Audit and Risk CommitteeAdèle Anderson (chair), Tony Bourne, Dame Janet Husband

Key objectives:• monitors the integrity of financial reporting; and

• assists the Board in its review of the effectiveness of the Group’s internal control and risk management systems.

Nomination CommitteeJohn Gildersleeve (chair), Dame Janet Husband, Garry Watts

Key objectives:• advises the Board on

appointments, retirements and resignations from the Board and its committees; and

• reviews succession planning for the Board.

Remuneration CommitteeTony Bourne (chair), Adèle Anderson, John Gildersleeve

Key objectives:• determines the

appropriate remuneration packages for the Chairman, Executive Directors and Group Company Secretary; and

• recommends and monitors the level and structure for other senior management remuneration.

Disclosure CommitteeGarry Watts, Simon Gordon, Andrew White, Daniel Toner, Antony Mannion

Key objectives:• ensures that the Company

complies with its disclosure obligations, specifically under the Market Abuse Regulation and related legislation; and

• oversees the Company’s Share Dealing Code including employee training.

Garry Watts Executive Chairman

Key objectives:• ensure effectiveness of the Board;• promote high standards of corporate governance;• ensure clear structure for the operation of the Board and its committees; and• encourage open communication between all Directors.



The number of Non-Executive Directors and their range of skills and experience continues to be carefully reviewed. This requirement and the number of Directors, together with the Group’s succession plans, will form part of the Nomination Committee activities and the Board’s evaluation process in 2017. The Board considers its size and composition to be appropriate for the current requirements of the business.

Committee composition is set out in the relevant committee reports. No one other than committee chairs and members of the committees is entitled to participate in meetings of the Audit and Risk, CGSC, Disclosure, Nomination and Remuneration committees, unless by invitation of the respective committee chair. John Gildersleeve is the Deputy Chairman and Senior Independent Director.

Biographical details of the Directors are set out on pages 54 and 55.

Appointments to the BoardRecommendations for appointments to the Board are made by the Nomination Committee. The Nomination Committee follows a formal, rigorous and transparent procedure for the appointment of new Directors to the Board. Further information is set out in the Nomination Committee Report on pages 74 and 75.

Time commitment of the Non-Executive DirectorsThe Non-Executive Directors each have a letter of appointment, which sets out the terms and conditions of their directorship. An indication of the anticipated time commitment is provided in any recruitment role specification, and each Director’s letter of appointment provides details of the meetings that they are expected to attend.

Non-Executive Directors are required to set aside sufficient time to prepare for meetings, and to regularly refresh and update their skills and knowledge. In signing their letters of appointment, all Directors have consequently agreed to commit sufficient time for the proper performance of their responsibilities, acknowledging that this will vary from year to year, depending on the Group’s activities.

Board meeting attendanceThe attendance of the Directors who served during the year ended 31 December 2016, at meetings of the Board, is shown in the table below. The number of meetings a Director could attend in the year is shown in brackets.

Executive Chairman

Garry Watts 9(9)

Deputy Chairman and Senior Independent Director

John Gildersleeve 8(9)

Executive Directors

Simon Gordon 9(9)

Rob Roger 3(4)

Andrew White1 4(5)

Non-Executive Directors

Adèle Anderson2 4(4)

Tony Bourne 9(9)

Dame Janet Husband 9(9)

Robert Lerwill 3(4)

Danie Meintjes 9(9)

Simon Rowlands 9(9)

1 Andrew White was appointed an Executive Director on 1 July 2016.

2 Adèle Anderson was appointed an independent Non-Executive Director on 28 July 2016.

To the extent that Directors are unable to attend scheduled meetings, or additional meetings called on short notice, they will receive the papers in advance and relay their comments to the Executive Chairman for communication at the meeting. The Executive Chairman will follow up after the meeting in relation to both the discussions held and decisions taken.

EffectivenessBoard compositionThe Board seeks to ensure that both it and its committees have the appropriate range of skills, experience, independence and knowledge of the Group to enable them to discharge their respective duties and responsibilities effectively; for example, the 2017 Board calendar includes both sessions on clinical and statutory regulations, and hospital visits.

Directors are expected to attend all Board and committee meetings, and any additional meetings, as required. Each Director’s other significant commitments were disclosed to the Board at the time of their appointment and they are required to notify the Board of any subsequent changes. The Group has reviewed the availability of the Non-Executive Directors and considers that each of them is able to, and in practice does, devote the necessary amount of time to the Group’s business.

Induction and trainingGenerally, reference materials are provided, including information about the Board, its committees, directors’ duties, procedures for dealing in the Group’s shares and other regulatory and governance matters, and Directors are advised of their legal and other duties, and obligations as directors of a listed company.

On appointment, Adèle Anderson completed a detailed induction programme that included meeting with other members of the Board and the senior leadership team. She undertook a thorough familiarisation of the business which included a visit to Spire Southampton Hospital. The Company’s brokers and legal adviser also met with Adèle to provide insight into the healthcare industry and provide training on directors’ statutory duties respectively. Andrew White, on appointment as an Executive Director, also received training on his statutory duties.

The Group Company Secretary ensures that any additional request for information is promptly supplied. The Executive Chairman, through the Group Company Secretary, ensures that there is an ongoing process to review any internal or external training and development needs.

During the year, all Directors received updates on the implementation and training on the requirements of the EU’s Market Abuse Regulation.

As already noted, in the event of a general training need, in-house training will be provided to the entire Board. Necessary and relevant regulatory updates are provided as a standing item at each Board meeting in the Group Company Secretary’s report and Board briefing by external advisers, where appropriate.


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GOVERNANCE



Directors’ indemnitiesThe Directors of the Company have the benefit of a third-party indemnity provision, as defined by section 236 of the Companies Act 2006, in the Group’s Articles of Association. In addition, Directors and officers of the Group are covered by directors’ and officers’ liability insurance.

Directors’ conflicts of interestThe Companies Act 2006 provides that directors must avoid a situation where they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests. Directors of public companies may authorise conflicts and potential conflicts, where appropriate, if a company’s articles of association permit.

The Board has established formal procedures to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company (Situational Conflicts). Directors declare Situational Conflicts, so that they can be considered for authorisation by the non-conflicted directors.

In considering a Situational Conflict, these Directors act in the way they consider would be most likely to promote the success of the Group, and may impose limits, or conditions, when giving authorisation or, subsequently, if they think this is appropriate.

The Group Company Secretary records the consideration of any conflict and any authorisations granted. The Board believes that the system it has in place for reporting Situational Conflicts continues to operate effectively.

Information and supportThe Board ensures that it receives, in a timely manner, information of an appropriate quality to enable it to adequately discharge its responsibilities. This is aided by the use of an online portal. Papers are provided to the Directors in advance of the relevant Board or committee meeting to enable them to make further enquiries about any matters prior to the meeting, should they so wish. This also allows Directors who are unable to attend to submit views in advance of the meeting.

Outside the Board papers process, the Executive Directors provide written updates to the Non-Executive Directors on important business issues, including financial and commercial information. In addition, relevant updates on shareholder matters (including analysts’ reports) are also provided to the Board.

All Directors have access to the advice and services of the Group Company Secretary. There is also an agreed procedure in place for Directors, in the furtherance of their duties, to take independent legal advice, if necessary, at the Group’s expense.

Election of DirectorsAll the Directors offered themselves for election or re-election at the second annual general meeting in May 2016 and, in future, will be re-elected in accordance with the requirements of the UK Code.

All Directors will stand for election or re-election at the annual general meeting in 2017 except for John Gildersleeve who has indicated that he wishes to retire from the Board before this date. The biographical details of each Director standing for election or re-election is included in the 2017 Notice of Meeting. The Board believes that each of the Directors standing for election is effective and demonstrates commitment to their respective roles. Accordingly, the Board recommends that shareholders approve the resolutions to be proposed at the 2017 annual general meeting relating to the election of the Directors.

The biographical details of all current Directors are set out on pages 54 and 55.

AccountabilityThe Audit and Risk Committee The Audit and Risk Committee Report is set out on pages 68 to 71 and identifies its members, whose details are set out on page 55.

The report describes the Audit and Risk Committee’s work in discharging its responsibilities during the year ended 31 December 2016, and its terms of reference can be found on the Group’s website at www.spirehealthcare.com.

Risk management and internal control The Board has overall responsibility for establishing and maintaining a sound system of risk management and internal control, and for reviewing its effectiveness. This system is designed to manage, rather than eliminate, the risks facing the Group and safeguard its assets. No system of internal control can provide absolute assurance against material misstatement or loss. The Group’s system is designed to provide the Directors with reasonable assurance that issues are identified on a timely basis and are dealt with appropriately.

The Audit and Risk Committee and the Clinical Governance and Safety Committee, whose reports are set out on pages 68 to 71 and pages 72 and 73, respectively, assist the Board in reviewing the effectiveness of the Group’s risk management system and internal controls, including financial, clinical, operational and compliance controls.

Executive compensation and riskOnly independent Non-Executive Directors are allowed to serve on both the Audit and Risk Committee and Remuneration Committee. The Non-Executive Directors are therefore able to bring their experience and knowledge of the activities of each committee to bear when considering the critical judgements of the other.

This means that the Directors are in a position to consider carefully the impact of incentive arrangements on the Group’s risk profile and to ensure the Group’s remuneration policy and programme are structured, so as to accord with the long-term objectives and risk appetite of the Group.



Financial and non-financial riskThe Clinical Governance and Safety Committee, with the Audit and Risk Committee, between them aim to ensure that the control and monitoring of both financial and non-financial risks is satisfactory.

In addition, the committees, jointly, seek to ensure, as far as practicable, there are no elements omitted or unnecessarily duplicated and that all critical judgements receive the correct level of challenge.

Relations with shareholdersThe Board is committed to communicating with shareholders and stakeholders in a clear and open manner, and seeks to ensure effective engagement through the Group’s regular communications, the annual general meeting and other investor relations activities.

The Group undertakes an ongoing programme of meetings with investors, which is led by the Chief Financial Officer and the Director, Strategy and Investor Relations and they attend a majority of the meetings. During the year, there were in excess of 260 individual meetings, conference presentations, group lunches and telephone briefings with investors.

During the consultation on executive remuneration conducted in February 2017, which you can read about on pages 76 to 91, the chair of the Remuneration Committee met with both major shareholders and voting agencies.

The Executive Chairman, Senior Independent Director and committee chairs remain available for discussion with shareholders on matters under their areas of responsibility, either through contacting the Group Company Secretary or directly at the annual general meeting.

The Company reports its financial results to shareholders twice a year, with the publication of its annual and half yearly financial reports. In conjunction with these announcements, presentations or teleconference calls are held with institutional investors and analysts, and copies of any presentation materials issued are made available through the Company’s website at www.spirehealthcare.com.

All Directors are expected to attend the Company’s annual general meeting, providing shareholders with the opportunity to question them about issues relating to the Group, either during the meeting, or informally afterwards.

Annual general meetingShareholders are encouraged to participate at the Company’s annual general meeting, ensuring that there is a high level of accountability and identification with the Group’s strategy and goals. A summary of the proxy voting for the 2016 annual general meeting was made available via the London Stock Exchange and on the Company’s website as soon as reasonably practicable on the same day as the meeting.

Results of our second annual general meeting held on 19 May 2016 were:

Summary of resolution Total votes for % Total votes against % Votes withheld

1 2015 Annual Report and Accounts 99.96 0.04 12,059

2 2015 Directors’ Remuneration Report 99.02 0.98 26,991,857

3 Final Dividend 100.00 0.00 0

4 to 12 Election or re-election of Directors Between 97.34 and 99.89 Between 0.11 and 2.66 Maximum 120,000

13 Reappointment of Auditors 100.00 0.00 1,156,173

14 Auditors’ remuneration 100.00 0.00 0

15 Political expenditure 99.75 0.25 0

16 Authority to allot shares 94.00 6.00 0

17 Sharesave scheme approval 99.63 0.37 0

18 Disapplication of statutory pre-emption rights* 90.49 9.51 0

19 General meetings to be held on 14 clear days’ notice* 98.11 1.89 0

* Special resolution


STRATEGIC REPORT

GOVERNANCE



Adèle Anderson Committee chair

Audit and Risk Committee ReportOur priority is to deliver an effective governance and risk management framework that allows us to ensure the appropriateness of the Group’s financial reporting.

Dear Shareholder,

I would like to begin by thanking Robert Lerwill for his stewardship of the Committee since the Company’s Admission in 2014 until the end of June 2016 when he stepped down from the Board. Under his leadership the Committee established solid foundations for maintaining the highest standards of governance and risk management across the Group which I aim to build on.

We have taken the decision to include an extra meeting in our annual schedule to allow more time for deep dive sessions on matters of particular interest to the Committee.

Risk management and internal controlsInternal audit and risk were two areas of particular focus for the Committee during the year and we allocated a significant proportion of each meeting to ensure a robust discussion on both matters.

2016 and 2017 Internal Audit PlansFrom the 2016 Internal Audit Plan, the Committee received a detailed presentation from Phil Peplow, Group IT Director, on IT security and also reviewed the results of an independently commissioned Information Assurance Health Check report. In a world where cybersecurity regularly appears in the national headlines, it was extremely important for the Committee to understand the challenges facing the Company and the actions being taken.

Our plan for this year again focuses on areas identified as high risk, in particular where existing regulatory controls and inspections are not considered to be sufficiently comprehensive in terms of providing independent assurance on the effectiveness of internal controls. The specific areas of focus for 2017 include:

• a revenue audit;• a review of physical asset assessments

and maintenance through the buildings maintenance system;

• a review of information governance; and• an audit of business continuity.

A high-level Internal Audit Plan will continue to be approved by the Committee on an annual basis.

Internal Audit functionHistorically, the Group has not considered it necessary to establish an Internal Audit function, in part because of the way hospitals and administration activities are structured. Whilst the Committee acknowledges this as a basis, it agreed during the year that a formal structure for the function should be established in early 2017 and recruitment of a Head of Internal Audit is in progress.

Risk management This year, the Committee performed a detailed review of the ongoing risk management identification programme which is designed to: clarify roles and responsibilities for risk management and oversight; set out a consistent end-to-end process for managing risk across the business; provide the Board with a clear line of sight over the principal risks; and provide an overview of how the principal risks are being managed. Our review included reports from the Group Head of Risk on the evaluation process as well as a review of changes to significant risks identified at both operating entity and Group levels. This process will complete in 2017 and the Committee will continue to monitor.


GOVERNANCE: AUDIT AND RISK COMMITTEE REPORT

Significant issues and material judgementsThe Audit and Risk Committee assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgements. The table below summarises the matters where the most material judgements have been made in relation to reporting in 2016:

Matters Judgement and estimation required How the Committee gained comfort on the matter

Improper revenue recognition – management manipulation

Pressure to achieve results and secure bonus payments could lead management to manipulate the financial reporting of revenue. This could include the:

• manipulation of prices charged, in particular in relation to PMI and NHS revenue;

• intentional mis-coding of procedures by hospitals impacting revenue recorded;

• misreporting of other income in the year; and • overstatement of deferred revenue at the year end.

Management carry out a detailed review of monthly hospital performance compared to forecast, in particular focusing on the cut-off of revenue reported at the balance sheet date.

The Group maintains effective segregation of duties to safeguard the integrity of pricing masterfile data on which billing is dependent.

Billing to PMIs is subject to selective independent audit by representatives of the relevant PMI and issues arising are subject to timely review by management as appropriate.

Management routinely reconcile revenues and cash collections as part of monthly cashflow management procedures.

Internal audit work (commissioned from a third party) was carried out to test the adequacy of clinical coders, which did not raise any issues of concern.

The Committee noted the testing of revenue recognition, which included substantive testing of a sample of transactions back to proof of procedure and price lists. No significant issues were noted by Ernst & Young LLP during the course of their audit.

Improper revenue recognition – complexity of PMI and NHS contracts

The complexity of the pricing structures and the high volume of procedures undertaken present a risk in relation to the accuracy of revenue recognition, in particular the use of incorrect codes or prices.

Inappropriate capitalisation of development costs

Expenditure on internal capital projects is high. As at 31 December 2016, construction is under way on two new hospitals. Additionally, the Group has developed Spire St Anthony’s Hospital, and is undertaking other major projects at existing hospitals.

There is a risk of inappropriate capitalisation to these projects to enhance reported earnings.

The Committee considered the controls over capital expenditure incorporated within the Group’s project management procedures, as implemented by the business development team.

The Committee noted that the work carried out by Ernst & Young LLP supported its own independent findings in this area.

Deferred taxation on freehold properties

During the year, the Group considered it to be appropriate to reassess the basis for calculating deferred tax on the property portfolio and has now based the assessment on solely held-in-use basis. This gives rise to a material tax charge of £8.4 million which is excluded from tax on underlying profit.

The Committee was satisfied that the estimation of the tax charge was reasonable, and that the disclosures in the Annual Report and Accounts were appropriate.

The Committee was satisfied that any property valuation assumptions and judgements that underpin the position for taxation purposes were supported by independent expert opinion.

Provisions for patient claims

Such claims are typically complex. Judgement is required in the estimation of the size and incidence of claims, which is usually based on professional advice and historical information on similar claims.

The Group recognised total net provisions of £3.6 million at 31 December 2016.

The Committee reviewed management’s detailed report on the status of live claims and information concerning the settlement of related claims. It also considered the advice provided by the Group’s external legal and insurance advisers.

An overview of the risk management and internal controls processes are contained on pages 48 to 53. The Committee, with the assistance of the Clinical Governance and Safety Committee (‘CGSC’) (which focuses on key non-financial risks, including patient and clinical risks), carried out the following:

• reviewed the work carried out by the CGSC in relation to the risks within its remit;

• reviewed the Group’s system of internal control;

• monitored the risks and associated controls over the financial reporting processes, including the process by which the Group’s financial statements are prepared for publication; and

• reviewed reports from the external auditor on any issues identified during the course of its work, including on control weaknesses.

The overall risk management framework, including the Board’s appetite for risk and the underlying process for capturing and reporting risk and control data, will continue to be reviewed by the Board and its committees during 2017 to ensure that changes to reflect the new regulatory environment and best practice are incorporated.


STRATEGIC REPORT

GOVERNANCE



balanced and understandable, and whether it provided the necessary information for the shareholders to assess the Group’s performance, business model and strategy. The Committee took into account its own knowledge of the Group, its strategy and performance in the year, internal verification of the factual content, comprehensive review undertaken at different levels in the Group to ensure consistency and overall balance, and detailed review by senior management and the external auditor. The Committee was satisfied that, taken as a whole, the Annual Report and Accounts for the year ended 2016 is fair, balanced and understandable, and has affirmed that view to the Board.

Recent accounting developmentsThe Committee received updates from the Chief Financial Officer on the Group’s implementation of IFRS 15 Revenue from contracts with customers, which will be adopted in the year ending 31 December 2018, focusing on its implication for reported results, the methodology in which the standard would be adopted, and the implication for systems and process. An assessment of the impact of IFRS 16 Leases will be considered early in 2017.

Our priorities for 2017We will continue to prioritise internal audit in 2017 and look forward to the appointment of a Head of Internal Audit and their team. We will monitor their work as they begin to co-ordinate and deliver the internal audit programme we have agreed for the year.

A further focus for the Committee in 2017 will be embedding our agreed closer working relationship with the Clinical Governance and Safety Committee. We will together be reviewing our approach to clinical risk and audit, in order to recommend mitigation of risks identified and provide assurance to the Board.

Audit riskAt the Committee’s first meeting of the year, it received from Ernst & Young LLP a detailed plan identifying the scope of their audit for the year, planning materiality and their assessment of key risks. The audit risk identification process is considered a key factor in the overall effectiveness of the external audit process.

These risks were reviewed by the Committee during the reporting of the half year results to ensure the external auditor’s areas of audit focus remain appropriate.

Working relationship with the external auditorDuring the year, the Committee met with the external auditor without management present to provide additional opportunity for open dialogue and feedback between both parties. Matters typically discussed include the external auditor’s assessment of business risks, the transparency and openness of interactions with management, confirmation that there has been no restriction in scope placed on them by management, the independence of their audit and how they have exercised professional scepticism. I also meet with the external lead audit partner ahead of each Committee meeting.

External financial reportingThe Committee is responsible for monitoring, reviewing and challenging the integrity of the financial statements, and ensuring compliance with legal, regulatory and statutory requirements, giving due consideration to the provisions of the UK Corporate Governance Code.

The external auditor provided reports for the half year and year end reporting, including all significant issues, with an assessment of the appropriateness of management’s judgements. The Committee considered that management’s judgements were cautious, but not overly prudent.

At the request of the Board, the Committee considered whether the Annual Report and Accounts for the year ended 2016 was fair,

Principal activities during 2016The main activities relating to the financial year were as follows:

• agreeing the Committee’s rolling agenda for 2016;• approving the terms of engagement of the external auditor, including its remuneration and reviewing its independence;• approving the plan for the external audit for 2016;• discussing and reviewing the Group’s accounting policies and critical estimates and judgements;• assessing going concern and the viability of the Group;• reviewing and approving the half year results and the Annual Report and Accounts for the year ended 2016;• reviewing the development of the risk management framework for the Group, including risk appetite and risk evaluation

methodology and reviewing the Group risk register; and• reviewing the systems of internal control, including assessing the requirement for an internal audit function.

External auditThe Committee has primary responsibility for the relationship with, and performance of, our external auditor. This includes making the recommendation on their appointment, reappointment and removal of the external auditor, assessing their independence on an ongoing basis and for negotiating the audit fee in conjunction with the Chief Financial Officer.

Auditor appointmentErnst & Young LLP was appointed as the Company’s external auditor in July 2014 on our Admission to the London Stock Exchange, although they have served the business prior to Listing since 2008. Our current audit partner appointed by Ernst & Young LLP is Debbie O’Hanlon who took on the role in 2015. The Committee ensures that the external auditor adheres to The Auditing Practices Board’s Ethical Standard 3, which requires the rotation of the audit partner for listed companies every five years. As a result, Debbie O’Hanlon is anticipated to serve until 2020.

As noted, we reviewed the independence and effectiveness of the external auditor. We did this by:

• reviewing its proposed plan for the 2016 audit;

• discussing the results of its audit, including its views about material accounting issues and key judgements and estimates, and its audit report;

• reviewing the quality of the people and service provided by Ernst & Young LLP; and

• evaluating all of the relationships between the external auditor and the Group, to determine whether these impair, or appear to impair, the auditor’s independence.

The Committee recommended, and the Board subsequently agreed, that, for the year ending 31 December 2017, Ernst & Young LLP are reappointed under the current external audit contract and the Directors will be proposing the reappointment of Ernst & Young LLP at the annual general meeting in May 2017.


GOVERNANCE: AUDIT AND RISK COMMITTEE REPORT

Non-audit services and independenceThere are certain services termed ‘excluded services’ that are not permitted to be provided by the external auditor, including where the auditor may be required to audit its own work, would participate in activities that would normally be undertaken by management or is remunerated through a ‘success fee’ structure.

Ernst & Young LLP provided no non-audit services to the Group during the year ended 31 December 2016 (2015: £71,000 for IT services). Going forward, all non-audit fees will be approved by the Committee.

ViabilityThe Committee reviewed the process undertaken by management to support and allow the Directors to make the Group’s viability statement. The Committee considered and provided input into the determination of which of the Group’s principal risks and combinations thereof might have an impact on the Group’s liquidity and solvency. The Committee reviewed the results of management’s scenario modelling and the stress testing of these models. The viability statement can be found on page 49.

WhistleblowingThe Committee also continued its monitoring and oversight of the procedures for the receipt, retention and treatment of qualifying disclosures by staff.

The Group offers its staff an independent and confidential service, where staff may register any concerns about any wrongdoing or safety at work. The General Counsel and Group Company Secretary is, as Whistleblowing Officer, responsible for the investigation of any concerns arising and reporting directly to the Committee.

Annual evaluation of the Committee’s performanceThe second evaluation of the Committee’s performance was carried out in 2016 which confirmed that it continued to perform effectively.

Adèle AndersonChair, Audit and Risk Committee1 March 2017

Audit and Risk Committee at a glanceCommittee membership and meeting attendanceThe Audit and Risk Committee members at the end of 2016 and the number of meetings they each attended during the year were as follows (the maximum number of meetings that the member could have attended is shown in brackets):

MemberCommittee member since Position in Company

Committee meetings attended in 2016

Adèle Anderson (Committee Chair)

July 2016 Independent Non-Executive Director

3 (3)

Dame Janet Husband July 2014 Independent Non-Executive Director

4 (4)

Tony Bourne July 2014 Independent Non-Executive Director

4 (4)

Committee members biographies are shown on pages 54 and 55. Robert Lerwill chaired the Committee until 27 June 2016 when he stepped down as an independent Non-Executive Director.

The Audit and Risk Committee must have at least three members, all of whom must be independent Non-Executive Directors. If members are unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Chair of the Committee.

The Committee invites the external auditor and the Chief Financial Officer to attend each meeting with other members of the management team attending as and when invited. Representatives of the Group’s external auditor have a private session with the Committee or Chair of the Committee whenever required.

The Group Company Secretary, or their appointed nominee, acts as secretary to the Committee.

Recent and relevant financial experienceAt least one member of the Committee must have been determined to have recent and relevant financial experience and Adèle Anderson has been identified by the Board as meeting this requirement. Her extensive current and previous experience which included being a partner in KPMG until July 2011 and holding roles including chief financial officer of KPMG UK, chief executive officer of KPMG’s captive insurer and chief financial officer of KPMG Europe. Adèle Anderson also currently chairs the audit committees of both easyJet plc and intu properties plc.

Role and responsibilitiesThe Committee has responsibility for overseeing the financial reporting and internal financial controls of the Group, for reviewing the Group’s internal control and risk management systems, and for maintaining an appropriate relationship with the external auditor of the Group and for reporting its findings and recommendations to the Board.

These include:

• receiving and reviewing the Annual Report and Accounts of the Group and half yearly financial statements and any public financial announcements, and advising the Board on whether the Annual Report and Accounts is fair, balanced and understandable;

• receiving and reviewing reports from the external auditor, monitoring its effectiveness and independence, and approving its appointment and terms of engagement;

• agreeing the annual internal audit programme, including the use of internal resource or external consultants to undertake the programme, and reviewing the results;

• monitoring the effectiveness of the risk management system;• reviewing the effectiveness of the Group’s system of internal controls and assessing and advising the Board on the internal financial, operational and compliance controls; and

• overseeing the Group’s procedures for detecting fraud and relating to whistleblowing.

The Committee’s terms of reference can be found at www.spirehealthcare.com


STRATEGIC REPORT

GOVERNANCE



Clinical Governance and Safety Committee ReportDuring 2016, we continued to develop a robust and effective clinical governance framework, aiming to ensure that our hospitals and clinics consistently deliver the highest quality healthcare for all our patients.

Dear Shareholder,

On behalf of the Clinical Governance and Safety Committee (the ‘Committee’ or ‘CGSC’), I am pleased to present our report for the year ended 31 December 2016 and to outline our plans for the coming year. This is my second report on the Committee’s oversight of the Company’s clinical services, promotion of best practice and clinical governance.

The paramount importance of consistently delivering care of the highest quality to our patients is recognised across the business and I would like to acknowledge the support the Committee has received from the Board and senior leadership team as well as individual hospitals and their front-line clinical staff.

Our work is based on a Quality Governance Framework which brings together the results of clinical reviews, the clinical scorecard and a number of key performance indicators to give us, and the Board, assurance on the quality of services provided across all our hospitals. It enables benchmarking of clinical services between individual hospitals and, over time, provides indicators of trends in hospital quality.

During the year under review this framework has developed well, giving us robust information and good indications of progress.

Regulatory inspectionsThe Committee reviews the outcomes of inspection reports from the Care Quality Commission (‘CQC’), covering our hospitals in England, and from Healthcare Inspectorate Wales (HIW) and Healthcare Improvement Scotland (HIS).

Our Quality Governance Framework mirrors the CQC’s five domains of well-led, caring, responsive, effective and safe. At the time of writing, all Spire hospitals have received their first new format CQC inspections. Details of the results of those inspections published to date are given in the Clinical review on pages 36 to 39 of the Strategic Report. While the CQC reports have identified a number of areas for improvement, overall they reflect well on the quality of our care.

Looking back over the programme of CQC visits, there is no doubt that as an organisation, we have benefited from the scrutiny that they provide. The work undertaken by the clinical team throughout our group, involving clinical reviews and preparation for CQC visits, has helped us to identify areas for improvement and has brought teams together, improving the culture within our hospitals as our staff have worked towards a common goal.

During 2017, the Committee will continue to review progress in responding to regulatory recommendations.

2016 activitiesDuring 2016, the CGSC met on six occasions, five of which were at a Spire Healthcare hospital and one at the Company’s London head office. Hospitals visited included Spire St Anthony’s, Spire Washington, Spire Parkway, Spire Cardiff and Spire Hull and East Riding hospitals.

The hospital visits give the Committee valuable time to hear from local hospital teams on their plans for future development of clinical services and investment as well as to learn about the challenges they face in the ever changing healthcare landscape.

Professor Dame Janet Husband Committee chair


GOVERNANCE: CLINICAL GOVERNANCE AND SAFETY COMMITTEE REPORT

Clinical Governance and Safety Committee at a glanceCommittee membershipThe Clinical Governance and Safety Committee must have at least two members, one of whom must be an independent Non-Executive Director. The Board appoints the Chair of the Committee who must be an independent Non-Executive Director.



Dame Janet Husband (Committee Chair)


6 (6)

Tony Bourne July 2014 Independent Non-Executive Director

6 (6)

Garry Watts July 2014 Executive Chairman 5 (6)

Andrew White July 2016 Executive Director 2 (3)

The maximum number of meetings that the member could have attended during 2016 is shown in brackets. Committee members’ biographies are shown on pages 54 and 55. Rob Roger was also a member of the Committee until 30 June 2016.


Role and responsibilities These include:

• promoting a culture of high quality and safe patient care and experience;• reviewing the Group Medical Director’s Clinical Assurance Report and the quarterly

review of serious adverse events;• monitoring patient health and safety matters;• reviewing patient information governance matters;• reviewing the clinical matters on the Whistleblowing Register; and• promoting continuous clinical improvements.


We have also gained greater insights by meeting consultants and members of staff on an individual and informal basis. As a result we have been able to undertake deeper dives, pursuing areas of concern and gaining assurance that issues are dealt with in an appropriate and timely manner.

During our programme of work the Committee also reviewed the clinical matters on the Company’s Whistleblowing Register and the investigation reports into whistleblowing concerns raised during the year.

The Committee continued its programme of themed reviews which this year included presentations on:

• patient involvement in service development;

• clinical training and recruitment;• clinical claims rates and management; and • quality assurance of services, particularly

in Radiology and Pathology.

Hospital visitsI have also continued my own programme of informal personal visits to our hospitals. I have now visited every one of our hospitals and both of our state-of-the-art specialist cancer centres – the latter, of course, being my area of particular professional interest.

During my visits I have enjoyed meeting groups of frontline staff to gain understanding of the culture within their hospitals, the challenges and pressures they face in their roles, and their motivations in working for Spire Healthcare. I have been strongly impressed with the sense of family, particularly within our smaller hospital teams. I have met many colleagues who have worked for Spire for many years. But I have also detected some concern over pressure of work, staff shortages and the difficulty in recruiting suitably skilled staff, particularly in areas such as theatres and critical care. These concerns are linked to national issues, but I am pleased to say that the Company is developing a human resources strategy to address the challenge.

Committee meetings in 2017After our end of year evaluation of Committee format, agendas and performance, we have decided to continue the successful plan of holding some of our meetings at hospitals. These will continue to be scheduled to take place ahead of Board meetings, so that there is a timely flow of information on clinical governance matters to the other Board Directors. We believe that this ‘Ward to Board’ approach to clinical governance creates genuine value for both the Board as well as to our hospital managers and their staff.

We will also continue our planned themed review programme in 2017, with areas of focus to include chemotherapy, pharmacy, Specialist Cancer Care Centres as well as a review of the quality data due to be published by the Private Healthcare Information Network (PHIN) from April 2017.

Developing our workThe Committee’s approach and areas of focus continue to develop, linked to our annual evaluation of performance. For example, as part of our clinical governance programme the Group Medical Director has been instrumental in reviewing our approach to serious adverse events (‘SAEs’), to improve the reporting of SAEs, and the process of root cause analysis and developing a more standardised approach to the reporting of such incidents across the Group.

In the coming year, a major focus will be linking more closely with the Audit and Risk Committee and its new chair, Adèle Anderson. Together we will review our approach to clinical risk and audit, reviewing arrangements in order to improve understanding and making recommendations to mitigate any risks identified and to provide

robust assurance to the Board. Furthermore we will be feeding into and monitoring the progress of the development of a robust clinical risk register, linking individual hospital risk registers with the overall corporate risk register.

I look forward to reporting further progress in our continued development of robust and effective clinical governance across all Spire Healthcare’s hospitals during 2017.

Professor Dame Janet Husband DBE FMedSci, FRCP, FRCR Chair, Clinical Governance and Safety Committee 1 March 2017


STRATEGIC REPORT

GOVERNANCE



Nomination Committee ReportThe Committee continues to play a vital role in ensuring the right individuals are appointed to lead the Company.

Dear Shareholder,

The Nomination Committee (the ‘Committee’) continues to play a vital role in ensuring that the right individuals are appointed to lead the Company and I am extremely pleased with the recommendations that have been made to the Board and senior management.

Before I address the Committee’s role in these appointments, I’d like to acknowledge some changes to the Committee’s membership. Robert Lerwill regretfully had to step down as an independent Non-Executive Director in June and I’d like to thank him for his involvement at our meetings. Rob Roger also stepped down from the Committee at the end of June when he left the Company. The Board decided to appoint Garry Watts as a member of the Committee from July 2016

and, although Garry is not classified as an independent director, the Committee has always, and continues, to meet the requirement under its terms of reference to have a majority of independent members.

Director and senior management changesI was able to report to you last year on the role of the Committee in the management changes that were agreed following Rob Roger’s decision to leave the Board, with Garry Watts resuming his role as Executive Chairman from 14 March 2016 and Andrew White becoming an Executive Director from 1 July 2016. The Committee closely monitored the transition from the announcement through to Rob’s departure on 30 June 2016.

Although the Company announced Andrew White’s period of sustained medical treatment, the Committee has been impressed with his leadership of the Company and enthusiasm for the role. As a Committee we were in unanimous agreement that Andrew should become the Company’s new Chief Executive Officer on his full recovery.

In May, I informed the Executive Chairman of my own intention to stand down as Deputy Chairman and Senior Independent Director. It was initially anticipated that this would happen by the end of 2016 but I will now remain in role until no later than our 2017 annual general meeting. The Executive Chairman has led the search for a new Senior Independent Director with the assistance of Heidrick & Struggles, a senior executive search firm.

Following Robert Lerwill’s unanticipated departure, the Executive Chairman and the Committee moved quickly to appoint a new independent Non-Executive Director with recent and relevant financial experience who was capable of chairing the Company’s Audit and Risk Committee. A number of candidates were put forward by Heidrick & Struggles but the Committee unanimously agreed on Adèle Anderson. Adèle’s knowledge of FTSE boards and experience of chairing audit committees has meant she has speedily proved an excellent addition to the Board.

The Committee reviewed and endorsed the appointment of Catherine Mason as the Company’s new Chief Operating Officer following the recommendation of the Executive Chairman. Members of the Committee took the opportunity to meet with Catherine prior to her appointment and were impressed with her extensive operational experience and recognised that she would make an important addition to the senior leadership team.

John Gildersleeve Committee chair


GOVERNANCE: NOMINATION COMMITTEE REPORT

2016 activitiesAs a Committee our priorities during the year have been to:

• review and recommend the Director and senior management changes to the Board;

• evaluate the balance of skills, knowledge and experience on the Board and its diversity, including gender;

• undertake a performance review;• review the independence of each Non-Executive Director, and the balance of skills, knowledge, experience and diversity on the Board prior to recommending Directors’ re-election at the annual general meeting; and

• review and update the Committee’s terms of reference.

Committee evaluationThe Committee completed its second annual performance evaluation as part of the overall Board evaluation process and the findings were discussed and reviewed at a meeting in November. The Committee was considered to be operating effectively in fulfilling its duties throughout 2016.

Diversity and inclusionAs a Committee we acknowledge the importance of diversity, including gender, both on the Board and throughout the organisation. We pride ourselves on our inclusive nature as a company.

Our aim is for the Board to consist of individuals with diverse experience who can add real value to Board debates, thereby supporting the achievement of our strategic objectives. This includes diversity of industry skills, knowledge and experience in addition to gender and ethnicity. We noted with interest the publication of the Hampton-Alexander review on gender leadership in FTSE companies, and are always mindful of the recommendations in the appointments we make. However, our overriding intent in any new appointment must always be to select on merit, in fulfilment of our role of ensuring the continued success of the Company.

Re-election of DirectorsThe Committee met in early 2017 and reviewed the continuation in office, and potential reappointment, of all members of the Board. Following this review, the Committee recommended to the Board that all Directors should be reappointed, and hence all Directors, except for me, will seek election or re-election at the annual general meeting.

John GildersleeveChair, Nomination Committee 1 March 2017

Nomination Committee at a glance Committee membership and meeting attendanceThe Nomination Committee members at the end of 2016 and the number of meetings they each attended during the year were as follows (the maximum number of meetings that the member could have attended is shown in brackets):



John Gildersleeve (Committee Chair)

July 2014 Deputy Chairman and Senior Independent Director

4 (4)

Dame Janet Husband July 2014 Independent Non-Executive Director

4 (4)

Garry Watts July 2016 Executive Chairman 2 (3)

Committee members’ biographies are shown on pages 54 and 55. Both Robert Lerwill and Rob Roger also served as members of the Nomination Committee until 27 June 2016 and 30 June 2016 respectively when both resigned as Directors of the Company.

The Nomination Committee did not meet the requirements of its own terms of reference to have at least three members between the resignation of Rob Roger in June and the appointment of Garry Watts a month later. The Committee did not meet during this short period. The majority of Committee members were independent Non-Executive Directors at all times during the year, in line with the provisions of the UK Corporate Governance Code. The Board appoints the Chair of the Committee, who must be either the Chairman of the Board or an independent Non-Executive Director.


Role and responsibilitiesThe Committee’s foremost priorities are to ensure that the Group has the best possible leadership and a clear plan for both Executive and Non-Executive Director succession. Its prime focus is, therefore, to concentrate upon the strength of the Board, for which appointments will be made on merit against objective criteria, selecting the best candidate for the post. The Nomination Committee advises the Board on these appointments, and also on retirements and resignations from the Board, and its other Committees.

The Committee will regularly examine succession planning based on the Board’s balance of skills and overall diversity. Led by the Committee, succession planning of the Board will form an integral part of the Board’s annual strategy meeting.

Process for Board appointmentsWhen considering Board recruitment, the Committee will draw up a specification for a Director, taking into consideration the balance of skills, knowledge and experience of its existing Board members, the diversity of the Board, the independence of continuing Board members, together with the ongoing requirements and strategic development of the Group. The search process can then focus on appointing a candidate with a balance of skills that will enhance the Board.

The Committee will utilise the services of an executive search firm to identify appropriate candidates, ensuring that the search firm appointed does not have any other conflicts with the Group. In addition, the Committee will only use those firms that have adopted the Voluntary Code of Conduct addressing gender diversity and best practice in search assignments. A long list of potential appointees will then be reviewed, followed by the shortlisting of candidates for interview, based upon the objective criteria identified at inception. Care is taken to ensure that all proposed appointees will have sufficient time to devote to the role and do not have any conflicts of interest. The Committee will then recommend a preferred candidate and the Directors not on the Committee will meet the candidate. Following these meetings, and assuming acceptance, the Committee will make a formal recommendation to the Board on the appointment. Wherever possible, the Nomination Committee will arrange for all Directors to meet the preferred candidate.



STRATEGIC REPORT

GOVERNANCE



Tony Bourne Committee chair

Directors’ Remuneration ReportAt Spire Healthcare, we aim to operate a remuneration structure that is both simple and transparent, which will deliver value to shareholders in the medium to long term.

Dear Shareholder,

The remuneration structure operated at Spire Healthcare is intended to be simple and transparent. The Directors’ Remuneration Policy obtained strong support from shareholders at the 2015 annual general meeting, and the Committee intends to continue operating under this policy in 2017. For the coming year, the Committee is not proposing to make any amendments to the Remuneration Policy including any changes to the quantum of opportunities proposed.

Overall, the Committee remains satisfied that the current and proposed combination of bonus and long-term incentive provides a simple structure which appropriately reflects the Group’s strategic priorities, our core values and ultimately shareholders’ interests.

Remuneration decisions in respect of 2016Although financial results for the year were reasonable, factors including market headwinds, the continued investment in our two new hospitals and the performance of Spire St Anthony’s Hospital impacted our overall performance.

This has meant that the EBITDA achieved was below the threshold that was set by the Committee at the start of the year and consequently no bonus payment will be made to senior management in respect of the 2016 financial year. Although this is disappointing, it does once again demonstrate the robust approach to target setting as well as the Committee’s commitment to aligning pay with performance.

The performance period for the share awards granted in 2014 under the Company’s Long Term Incentive Plan (‘LTIP’) ended on 31 December 2016. As a result of the significant increase in its share price since Admission, the Company’s total shareholder return (‘TSR’) performance was well within the upper-quartile of the comparator group. In due course, this award will vest at 50% of the maximum level. Further details are set out in the main body of the Remuneration Report.

Remuneration decisions for 2017As noted above no changes to the Remuneration Policy are proposed for 2017. The incentive structure will continue to comprise an annual bonus, which is partially deferred, and an LTIP award which measures performance over three years.

Prior to the grant of LTIP awards in 2017, the Committee reviewed the performance measures applicable to future awards. The Committee concluded that it was important for the LTIP to focus on metrics which provide a link to the Group’s strategic priorities and are aligned to value created for shareholders.

Consistent with awards granted in prior years, the Committee has determined that the majority of the 2017 LTIP award (70%) will continue to be based on stretching EPS and relative total shareholder return (TSR) targets. These measures provide alignment with the shareholder experience and remain core indicators of our long-term performance.

For 2017 LTIP grants, the EPS and relative TSR targets will be complemented with a new element based on metrics linked to Operational Excellence. Given the highly regulated and quality-sensitive nature of the healthcare sector, the clinical quality of our operations and the experience of our

GOVERNANCE: DIRECTORS’ REMUNERATION REPORT


Remuneration Committee at a glance2016 highlightsThe Committee began the process to review the performance metrics associated with future LTIP awards.

No changes have been made to the Company’s Remuneration Policy during the year.

Committee membership and meeting attendanceThe Remuneration Committee members at the end of 2016 and the number of Committee meetings they each attended during the year are as follows (the maximum number of meetings that the member could have attended is shown in brackets):



Tony Bourne (Committee Chair)


4 (4)

John Gildersleeve July 2014 Deputy Chairman and Senior Independent Director

3 (4)

Adèle Anderson August 2016 Independent Non-Executive Director

2 (2)

Committee members’ biographies are shown on pages 54 and 55. Robert Lerwill also served as a member of the Remuneration Committee until 27 June 2016.

The Remuneration Committee must have at least three members, all of whom must be independent Non-Executive Directors, and the Board appoints the Committee’s Chair. If a member is unable to attend a meeting, they have the opportunity beforehand to discuss any agenda items with the Committee’s Chair.


Role and responsibilitiesThe Remuneration Committee has delegated authority from the Board to determine the framework and total remuneration arrangements of the Executive Directors and, in consultation with the Executive Chairman, senior management. It also oversees the Group’s share-based incentive arrangements. In practice, the Committee agrees the:

• policy for cash remuneration, executive share plans, service contracts and termination arrangements;

• reward packages of Executive Directors;• termination arrangements for Executive Directors;• recommendations to the Board concerning any new executive share plans or changes

to existing schemes which require shareholders’ approval; and• basis on which awards are granted and their amount to Executive Directors and

senior management under the LTIP.


patients are vital to our long-term prospects. These factors are key differentiators between providers in the market, and drive not only how Spire Healthcare performs over the period, but also how the Company is positioned for growth in future years. The Committee has therefore determined that this should be reflected in the LTIP for 2017.

Operational Excellence, will be based upon two sector-specific performance metrics:

• Regulatory ratings – this is a measure of clinical excellence based on a robust external inspection regime. As results are publicly available they are able directly to influence how customers make informed choices between providers; and

• Net Promoter Score – this is a measure of the patient experience. Sustained performance in this area supports future referrals.

In respect of both our existing estate and all future hospitals, targeting Operational Excellence will provide a clear long-term measure of how the Group sustains and improves the underlying quality of our operations.

Overall, the Committee is of the view that the addition of the Operational Excellence element provides a more balanced approach to long-term performance assessment which will be strongly aligned in the medium and long term with shareholders’ interests.

As part of the review process, the Committee engaged with major shareholders regarding the proposed approach, and feedback received regarding the addition of the Operational Excellence measures was positive.

Further details of the targets are set out in the Annual Report on Remuneration.

Shareholder communication and the annual general meetingThe Directors’ Remuneration Policy is due for renewal at the 2018 annual general meeting, as part of the standard three-year review process. Over the coming year, the Committee therefore plans to undertake an in-depth review of arrangements to ensure they continue to support the objectives of the business and remain in the best interests of the shareholders over the medium to long term.

Over the past year there has clearly been considerable debate regarding the structure of senior executive pay in the listed environment. The Committee has also noted evolving investor views on matters such as alternative incentive models and design features such as post-vesting holding periods. As part of the forthcoming review

the Committee will be mindful of these developments in market and best practice. The Committee intends to engage with major shareholders regarding any proposals in good time, prior to the annual general meeting in 2018.

I am committed to ensuring an open dialogue with our shareholders. If you have any questions about the content of this year’s Directors’ Remuneration Report please contact me via [email protected].

The Committee recommends the 2016 Directors’ Remuneration Report to you for approval and we look forward to your continued support at our annual general meeting in May 2017.

Tony BourneChair, Remuneration Committee1 March 2017


STRATEGIC REPORT

GOVERNANCE



Remuneration Policy ReportThe Company’s Remuneration Policy was approved by shareholders at the annual general meeting held on 21 May 2015 and remains unchanged. An extract from this report has been reproduced below for ease of reference. For clarity the content has been updated, where relevant, to include details of how the Remuneration Policy will be implemented in 2017. The Remuneration Policy as approved by shareholders is set out in the 2014 Annual Report and is available on our website.

Remuneration Policy tableFixed remuneration

Element Purpose and link to strategy Operation Maximum opportunity

Performance measures

Salary • To provide fixed remuneration that is appropriate for the role and to secure and retain the talent required by the Group.

• The Committee takes into account a number of factors when setting salaries, including:

− scope and responsibility of the role; − the skills and experience of the individual;

− salary levels for similar roles within appropriate comparators;

− overall structure of the remuneration package; and

− pay and conditions elsewhere in the Group.

• Salaries are normally reviewed annually, with any increase usually taking effect in January.

• While there is no defined maximum opportunity, salary increases normally take into account increases for full-time employees across the Group.

• The Committee retains discretion to make higher increases in certain circumstances, for example, following an increase in the scope and/or responsibility of the role, or a significant change in market practice or the development of the individual in the role.

• The Executive Directors’ salaries from 1 April 2017 are:

− Andrew White: £365,000 − Simon Gordon: £373,013

• None

Benefits • Fixed element of remuneration providing market competitive benefits to both support retention and recruit people of the necessary calibre.

• A range of role-appropriate benefits may be provided to Executive Directors, including such items as private medical insurance (for the Executive Director and their family), permanent health assurance, participation in an income protection scheme, life assurance, an annual health assessment (for the Executive Director and their spouse) and a car allowance.

• Additional one-off benefits may also be provided where the Committee considers this appropriate (e.g. on relocation).

• Executive Directors are also eligible to participate in any all-employee share plans operated by the Company from time-to-time on the same basis as other eligible colleagues.

• The Committee keeps the benefits package offered to existing and new Executive Directors under review.

• Whilst no maximum limit exists, individual benefit arrangements take into account a number of factors, including market practice for comparable roles within appropriate pay comparators.

• Participation in any HMRC-approved all-employee share plan is subject to the maximum permitted by the relevant tax legislation.

• None

Retirement benefits

• Fixed element of remuneration to assist with retirement planning.

• Retirement benefits are provided to both support retention and recruit people of the necessary calibre.

• Executive Directors can opt to join the Company’s defined contribution scheme, receive a contribution into a personal pension scheme, take a cash supplement or any combination of the three.

• The employer defined contribution level, the contribution into a personal pension scheme and/or cash supplement are kept under review by the Committee.

• The retirement benefits are not included in calculating bonus and long-term incentive quantum.

• The maximum level of retirement benefits is 25% of base salary, and the current provision for the Executive Directors is 18% of base salary.

• They are set by taking into account a number of factors, including market practice for comparable roles at appropriate pay comparators.

• For new Executive Directors, the nature and value of any retirement benefits provided will be, in the Committee’s view, reasonable in the context of market practice for comparable roles and take account of both the individual’s circumstances and the cost to the Group.

• None



Variable remuneration

Element Purpose and link to strategy Operation Maximum opportunity Performance measures

Annual bonus

• To incentivise and reward the achievement of annual financial, operational and individual objectives that are key to the delivery of the Group’s strategy.

• Objectives are set annually to ensure that they remain targeted and focused on the delivery of strategic goals.

• The Committee sets targets that require appropriate levels of performance, taking into account internal and external expectations of performance.

• As soon as practicable after the year end, the Committee meets to review performance against objectives and determines payout levels. The Committee may adjust payments to ensure they are reflective of overall performance.

• A portion of any bonus (as determined by the Committee) is normally deferred into an award of shares under the Deferred Bonus Plan (‘DBP’). Currently one-third of any bonus is deferred for a period of three years (although the Committee may vary this approach).

• DBP awards may be in the form of conditional share awards or nil-cost options or any other form allowed by the Plan rules. This deferred bonus element is not normally subject to any further performance conditions, although it is subject to continued employment.

• Further details of the malus and clawback provisions applicable are set out on page 80.

• Maximum award opportunity for Executive Directors is 150% of base salary for each financial year, a portion of which is normally deferred into an award of shares under the DBP (currently one-third).

• Awards are based on a combination of financial, operational and individual goals measured over one financial year.

• At least 50% of the award will be assessed against the Group’s financial metrics. The remainder of the award will be based on performance against strategic objectives and/or individual objectives. Details of the performance measures for 2016 and 2017 are set out in the Annual Report on Remuneration.

• A sliding scale between 0% and 100% of the maximum award pays out for achievement between the minimum and maximum performance thresholds.

• For annual bonuses in respect of 2017, the targets will be based on EBITDA and a balanced scorecard of strategic metrics.

• The details of measures, targets and weightings may be varied by the Committee year-on-year based on the Group’s strategic priorities.

Long Term Incentive Plan (LTIP)

• To incentivise and reward the delivery of long-term strategic objectives.

• To align the interests of the Executive Directors with those of shareholders.

• To assist recruitment and retention of Executive Directors.

• Awards granted under the LTIP vest subject to achievement of performance conditions measured over a period of at least three years, unless the Committee determines otherwise.

• Awards may be in the form of conditional share awards or nil-cost options or any other form allowed by the Plan rules.

• Further details of the malus and clawback provisions applicable are set out on page 80.

• The maximum award opportunity (at grant) for Executive Directors in respect of a financial year is 200% of base salary.

• Vesting of awards will be dependent on a range of financial, operational or share price measures, as set by the Committee, which are aligned with the long-term strategic objectives of the Group and shareholder value creation.

• Not less than 30% of an award will be based on share price measures. The remainder will be based on either financial and/or operational measures.

• At the threshold performance, no more than 25% of the award will vest, rising to 100% for maximum performance.

• For awards granted in 2017, vesting will be based on EPS (35%), relative TSR (35%) and Operational Excellence (30%) targets.

• The details of measures, targets and weightings may be varied by the Committee prior to grant based on the Group’s strategic objectives.


STRATEGIC REPORT

GOVERNANCE



Notes to the policy table performance measures and targetsAnnual bonusThe annual bonus performance measures are designed to provide an appropriate balance between incentivising Executive Directors to meet financial targets for the year and to deliver specific strategic, operational and personal goals. This balance allows the Committee to review the Group’s performance in the round against the key elements of our strategy, and appropriately incentivise and reward the Executive Directors.

Bonus targets are set by the Committee each year to ensure that Executive Directors are focused on the key financial and strategic objectives for the financial year. In doing so, the Committee usually takes into account a number of internal and external reference points, including the Group’s business plan.

Long Term Incentive PlanThe Committee believes it is important that the performance conditions applying to LTIP awards support the long-term ambitions of the Group and the creation of shareholder value. The Committee continues to consider that EPS and relative TSR metrics remain appropriate measures of long-term performance. In addition, 2017 awards will include Operational Excellence metrics to provide qualitative measures which are strategically important given the highly regulated and quality sensitive nature of the healthcare sector.

The Committee will keep the measures and weightings under review to ensure that the most appropriate measures to incentivise the long-term success of the Group are used.

Recovery provisions (malus and clawback)Prior to vesting, the Committee may cancel or reduce the number of shares subject to, or impose additional conditions on LTIP, DBP awards and Directors’ Share Bonus Awards in circumstances where the Committee considers it to be appropriate (‘malus’). Such circumstances may include: a serious misstatement of the Group’s audited financial results; a serious miscalculation of any relevant performance measure; a serious failure of risk management or regulatory compliance by a relevant entity; serious reputational damage to the Group; or the participant’s material misconduct.

In addition, for cash bonus awards in respect of 2015 and future years, and for LTIP awards granted after 1 January 2015, the Committee may also claw back vested awards in certain extreme circumstances (including those listed above) for up to two years following the determination of the relevant performance outcome.

Prior to applying malus or clawback, the Committee will take into account all relevant factors (including, where a serious failure of risk management or regulatory compliance or serious reputational damage has occurred, the degree of involvement of the employee in that failure or damage in question and the employee’s level of responsibility) in deciding whether, and to what extent, it is reasonable to operate malus and/or clawback. The Committee is satisfied that the above provisions provide robust safeguards against inappropriate payment of incentive awards.

Legacy arrangementsDirectors’ Share Bonus Plan Awards were granted to Rob Roger, Simon Gordon and Garry Watts (in recognition of his performance as Executive Chairman prior to Admission) to reflect their contribution to the Company prior to Admission. The final tranche of these awards vested during 2016. There are no further outstanding awards under this plan.

Recruitment policyIn determining remuneration for new Executive Directors, the Committee will consider all relevant factors, including the calibre of the individual and the external market, while aiming not to pay more than is necessary to secure the required talent. The Committee would seek to act in what it considers to be the best interests of the Group and its shareholders. Normally, the Committee will seek to align the new Executive Director’s remuneration package to the Remuneration Policy, as set out above.

Salary and benefits (including any retirement benefits) will be determined in accordance with the policy table above. In certain instances, the Committee may decide to appoint an Executive Director to the Board on a lower-than-typical salary, with the intention of gradually increasing the salary to move closer to market level as they build experience in the role. Normally, benefits will be limited to those outlined in the policy table above, including a relocation allowance in certain circumstances.

The maximum level of variable pay (excluding any buyouts) that may be awarded to a new Executive Director will be limited to 350% of base salary, which is consistent with the policy table above. Incentives will normally be granted under the existing plans; however, where appropriate, the Committee may tailor the award (e.g. time frame, form, performance criteria) based on the commercial circumstances.

The Committee may ‘buy out’ remuneration terms a new hire has had to forfeit on joining the Group. Buyout awards are intended to be of comparable commercial value, and capped accordingly. The Committee will take into account all relevant factors when determining the quantum and form/structure of any buyout, including any performance conditions attached to any forfeited awards, the likelihood of those conditions being met, and the proportion of the vesting/performance period remaining.

The service contracts for new appointments will be consistent with the policy described below. Where an Executive Director is appointed from within the organisation, the policy of the Group is that any legacy arrangements would be honoured in line with the original terms and conditions. Similarly, if an executive is appointed following an acquisition of, or merger with, another company, legacy terms and conditions would be honoured.



Executive Director service contracts and payments for loss of officeThe key employment terms and other conditions of the current Executive Directors, as stipulated in their service contracts, are set out below:

Provision Policy

Notice period • 12 months’ notice by either the Group or the Executive Director. This is also the policy for new recruits.

Benefits • The Group may agree that certain benefits will be specified within the Executive Directors’ service contracts.• The current Executive Directors are contractually entitled to private medical insurance (for the Executive Director

and his family), permanent health assurance, income protection, life assurance, an annual health assessment (for the Executive Director and their spouse) and a car allowance.

Termination payment

• It is the Group’s policy that service contracts contain provisions that allow the Group to terminate employment by making a payment in lieu of notice (‘PILON’) equivalent to (i) 12 months’ base salary, and (ii) the cost of specific benefits (including retirement benefits).

• Upon termination by the Group, the Group can determine whether a PILON is made as a single lump sum or paid in instalments, subject to mitigation. Where the sum is paid in instalments, the Executive Director has a duty to use reasonable endeavours to secure alternative employment as soon as reasonably practicable. In the event the Executive Director commences alternative employment with an annual salary of greater than £30,000, there will be a pro rata reduction in the PILON payments.

Immediate termination

• The service contract of an Executive Director may also be terminated immediately and with no liability to make payment in certain circumstances, such as the Executive Director bringing the Group into disrepute or committing a fundamental breach of their employment obligations.

External appointments

• Executive Directors may accept one position as a non-executive director of another publicly listed company that is not a competitor of the Group, subject to prior approval of the Board. External appointments to any other company (and treatment of any fees) are also subject to the prior approval of the Board.

In the event that the employment of an Executive Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between the Group and the employee, as well as the rules of any incentive plans in which they participate.

Where an Executive Director’s employment with the Group ceases prior to the payment of the annual bonus in respect of a financial year, the Committee in its absolute discretion will determine whether any bonus should be paid and the extent to which deferral into shares should be applied. Any awards would normally be prorated. For bonuses in respect of 2015 onwards, clawback provisions will also apply. For the avoidance of doubt, in the event the Executive Director is dismissed for misconduct, no bonus will be payable.

The treatment of share awards made by the Company is governed by the relevant share plan rules. The following table summarises the leaver provisions of share plans under which Executive Directors may currently hold awards.

PlanLeaver reasons where awards may continue to vest Vesting arrangements

Deferred Bonus Plan (DBP) and LTIP

• Death• Injury, ill health or

disability• Retirement• The transfer of the

individual’s employing company or business out of the Group

• Any other scenario in which the Committee determines good leaver treatment is justified

• LTIP awards will vest to the extent determined by the Committee, which, unless the Committee determines otherwise, will be calculated on the basis of the achievement of any performance conditions at the relevant vesting date and, unless the Committee determines otherwise, the period of time that has elapsed between grant and cessation of employment/directorship.

• The vesting date for such awards will normally be the original vesting date, although the Committee has the flexibility to determine that awards can vest upon cessation of employment.

• DBP awards will normally vest in full on the original vesting date, although the Committee has the flexibility to determine that awards can vest earlier.

• DBP and LTIP awards will continue to be subject to the malus provisions outlined on page 80 until the vesting of the awards. LTIP awards granted from 2015 onwards are subject to a clawback provision, as described above.

• Any other reason • Awards lapse in full.

Directors’ Share Bonus Plan (Legacy arrangements granted prior to Admission)

• Any circumstance other than dismissal for cause

• These awards were made in recognition of services provided to the Company prior to Admission and, as such, are not subject to continued employment (except in the case of dismissal for cause).

• Awards vested on the first and second anniversary of Admission to the extent that the share price performance targets were met.

• Dismissal for cause • Awards lapse in full.

Where Executive Directors participate in any HMRC-approved all-employee share plans, the leaver treatment will be consistent with the relevant legislation and on the same terms as all other employees.


STRATEGIC REPORT

GOVERNANCE



Chairman and Non-Executive DirectorsThe Group seeks to appoint Non-Executive Directors who have relevant professional knowledge (and/or specific technical skills) to support the current expertise of the Board and to match the healthcare sector within which the Group operates.

In the event of the appointment of a new Chairman and/or Non-Executive Director, remuneration arrangements will normally be in line with those detailed in the relevant table below. Fees to Non-Executive Directors will not include share options or other performance-related elements.

Remuneration of independent Non-Executive Directors, with the exception of the Chairman, is determined by the Chairman and the Executive Directors. The remuneration of the Chairman is determined by the Committee. Directors are not involved in any decisions in relation to their own remuneration.

The table below sets out the remuneration policy with respect to Non-Executive Directors. Non-Executive Directors do not participate in the Group’s bonus arrangements, share incentive schemes or retirement benefit plans.

Approach to setting remuneration for Non-Executive Directors Opportunity

• Fees are set at appropriate levels to ensure Non-Executive Directors are paid to reflect the individual responsibility taken, as well as the skills and experience of the individual. Fees are reviewed periodically.

• When setting fee levels, consideration is given to a number of factors, including responsibilities and market positioning.

• Where appropriate, benefits to the role may be provided. Travel and other reasonable expenses (including fees incurred in obtaining professional advice in the furtherance of their duties and any associated taxes) incurred in the course of performing their duties may be paid by the Group or reimbursed to Non-Executive Directors.

• The total fees paid to Non-Executive Directors will remain within the limit stated in the Articles of Association of the Company.

• Individual fees reflect responsibility and time commitment, as well as the skills and experience of the individual. Additional fees may be paid for further responsibilities, such as chairmanship of committees.

• Any benefits provided will be reasonable in the market context and take account of the individual circumstances and benefits provided to comparable roles. Expenses reasonably incurred in the performance of the role may be reimbursed or paid for directly by the Group, as appropriate, including any tax due on the benefits. Non-Executive Directors will also be covered by the Group’s indemnity insurance.

• The fees as at 31 December 2016 were: − Deputy Chairman and Senior Independent Director: £140,000; − Non-Executive Director basic: £50,000; and − Committee chairmanship: £10,000.

With effect from 1 April 2017, the fees will be increased as follows: − independent Non-Executive Director basic: £55,000; and − Chair of the Clinical Governance and Safety Committee: £15,000.

These are the first increases in Non-Executive Director fees since Admission in 2014.

Further details of remuneration arrangements for the Executive Chairman are set out in the Annual Report on Remuneration.

Under the terms of his appointment, Garry Watts is entitled to private medical expenses insurance (for both himself and his spouse and any dependent children), life assurance, annual health assessment (for both himself and his spouse) and office facilities to perform his duties as Chairman. Medical expenses insurance and life assurance will be provided under the Group’s arrangements or, if he obtains equivalent benefits directly, the Group will meet his costs (up to a specified cap).

Chairman and Non-Executive Directors’ letters of appointmentThe Chairman and Non-Executive Directors have letters of appointment that set out their duties and responsibilities. They do not have service contracts with either the Group or any of its subsidiaries.

The key terms of the appointments are set out in the table below. This is the policy for current and any new Non-Executive Directors.

Provision Policy

Period • In line with the UK Corporate Governance Code, the Chairman and all independent Non-Executive Directors are subject to annual re-election by shareholders at each annual general meeting.

• After the initial three-year term, the Chairman and the Non-Executive Directors are typically expected to serve a further three-year term.

Termination • The appointment of the Chairman is terminable by either the Group or the Director by giving 12 months’ notice.• The appointment of the Deputy Chairman is terminable by either the Group or the Director by giving three

months’ notice.• The appointment of any independent Non-Executive Directors is terminable by either the Group or the Director

by giving two months’ notice.• The Non-Executive Director nominated by Mediclinic International PLC pursuant to the terms of the relationship

agreement is terminable without notice.



Further detailed provisionsThe DBP and LTIP, as well as the outstanding legacy Directors’ Share Bonus Awards, will be operated in accordance with the relevant plan rules (which were summarised for shareholders in the Prospectus). The Committee may adjust or amend awards only in accordance with the provisions of the relevant plan rules. This includes making adjustments to awards to reflect one-off corporate events, such as a change in the Group’s capital structure. In accordance with the plan rules, awards may be settled in cash rather than shares, where the Committee considers this appropriate.

The performance conditions applicable to incentive awards may be amended on an appropriate basis determined by the Committee, if an event occurs or circumstances arise that cause the Committee to consider the performance condition is no longer a fair measure of performance (and, in the case of the Directors’ Share Bonus Awards, the Committee determines fairly and reasonably that the circumstances prevailing at grant have changed). For LTIP and Directors’ Share Bonus Awards, the amended performance condition will be at least as challenging as the original condition.

Under the DBP, LTIP and Directors’ Share Bonus Awards, participants may receive an additional amount, in cash or shares, to take account of the value of dividends the participant would have received on the shares that vest.

In the event of a change of control of the Company, LTIP awards may vest to the extent that the Committee determines, taking into account the extent to which any performance conditions have been satisfied, and such other factors as the Committee considers relevant in the circumstances, provided that, unless the Committee determines otherwise, awards will be adjusted to reflect the period of time that has elapsed between grant and cessation of employment/directorship; DBP awards will normally vest in full; and Legacy Share Bonus Awards may vest based on the per-share price payable to shareholders on the relevant transaction, or, in the case of a winding-up, the share price at the time. Alternatively, awards may be exchanged for equivalent awards in the acquiring company.

The Committee may make any remuneration payments (including vesting of incentives) and payments for loss of office, notwithstanding that they are not in line with the policy set out above, where the terms of that payment were agreed before this policy came into effect; or at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company.

The DBP and LTIP incorporate dilution limits. These limits are 10% in any rolling 10-year period for all plans and 5% in any rolling 10-year period for executive share plans. Shares issued out of treasury will count towards these limits for so long as this is required under institutional shareholder guidelines. Shares issued, or to be issued, pursuant to any awards granted on or before the date of Admission will not count towards these limits. In addition, awards that lapse shall be disregarded for the purposes of these limits.

The Committee may make minor amendments to the Policy set out above for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation without obtaining shareholder approval for that amendment.

Remuneration arrangements throughout the CompanyThe Policy for our Executive Directors is designed in line with the remuneration philosophy and principles that underpin remuneration across the Group. When making decisions in respect of the Executive Directors’ remuneration arrangements, the Committee takes into consideration the pay and conditions for employees throughout the Group. As stated in the policy table, salary increases are, in practice, normally aligned to the general employee population. The Committee does not directly consult with our employees as part of the process of determining executive pay.

Differences in Remuneration Policy for all employeesThe remuneration of the wider employee population is based on the same reward philosophy, whilst the components of remuneration vary with seniority. All employees, including Executive Directors, receive a salary and role-appropriate benefits. Role-specific annual bonus arrangements are operated across the Group. For more senior roles, a portion of the bonus is deferred on a similar basis to Executive Directors. Only senior individuals who can have significant influence on the performance of the Group as a whole are invited to participate in the long-term incentive plans. This provides those individuals with an incentive to help achieve the Group’s medium- and long-term objectives and create shareholder value, whilst ensuring their remuneration varies to the extent these goals are achieved.

Consideration of shareholder viewsThe structure of remuneration for Board members was first presented to shareholders in the Prospectus prior to Admission. It is next intended to present the Remuneration Policy to shareholders for approval at the annual general meeting in 2018 unless any alterations are required before then.

The Committee is always mindful of shareholders’ views when evaluating and setting future remuneration strategy, and intends to appropriately consult prior to any significant proposed changes to the Remuneration Policy.


STRATEGIC REPORT

GOVERNANCE



Annual Report on RemunerationSingle total figure of remuneration – Executive Directors (audited)The following table sets out the total remuneration for the Executive Directors for the year ended 31 December 2016. This comprises the total remuneration received over the full year from 1 January 2016 to 31 December 2016.

Andrew White1 Simon Gordon Rob Roger2

(£000) 2016 2015 2016 2015 2016 2015

Salary 182.5 – 363.1 350.0 262.5 525.0

Benefits 6.4 – 16.8 16.6 10.7 21.5

Retirement benefits 31.1 – 62.5 63.0 47.3 94.5

Annual bonus (including deferred element) – – – – – –

Long-term incentives3 – – 459.5 – – –

Sub-total 220.0 901.9 429.6 320.5 641.0

Legacy arrangement – Directors’ Share Bonus Plan Award4

– – 200.0 248.1 – 454.8

Total 220.0 – 1,101.9 677.7 320.5 1,095.8

1 Andrew White was appointed an Executive Director on 1 July 2016 on a salary of £365,000 per annum.2 Rob Roger stepped down as Chief Executive Officer and left the Company on 30 June 2016.3 The 2014 LTIP award is due to vest during 2017. For the purpose of the single figure table, the value of shares forecast to vest (including dividend equivalents) have been valued based on the average

share price over the final quarter of 2016 of £3.634.4 In accordance with the requirements of the disclosure regulations, the value of the Directors’ Share Bonus Plan Award vesting in 2016 is calculated based on the share price at the date of vesting of

£3.196 after part of the performance criteria for the second tranche of this award was met, inclusive of accrued dividends. Further details on the exercise of awards under the Directors’ Share Bonus Plan can be found on page 86.

Additional notes to the tableSalarySimon Gordon’s salary was increased from £350,000 to £367,500 per annum on 1 April 2016. Andrew White’s salary on appointment as an Executive Director on 1 July 2016 was £365,000 per annum.

BenefitsThe benefits consist of private medical insurance (for the Executive Directors and their families), life assurance, income protection cover and a car allowance.

Retirement benefitsThe amount set out in the table represents the Group contribution to the Executive Directors’ retirement planning at a rate of 18% of base salary. Simon Gordon is a member of the Spire Healthcare Pension Plan. Amounts above the HMRC annual allowance are paid as taxable cash supplements.

Annual bonusFor the 2016 financial year, the maximum bonus opportunity for Andrew White and Simon Gordon was 150% of base salary. The annual bonus targets were set at the beginning of the financial year, with 70% of the award being assessed against EBITDA and 30% assessed against a balanced scorecard based on strategic targets including productivity, customer, quality and staff measures. The threshold EBITDA target for 2016 was set at £164.0 million and no bonus would be payable if this threshold was not achieved.

Although the Company’s performance remained reasonable during the year, a number of internal and external factors impacted the business, meaning that it did not achieve the minimum EBITDA threshold of £164.0 million. Although both Executive Directors largely met their individual objectives under the balanced scorecard, the Committee determined that no bonus will be paid in respect of 2016.

Departure terms for Rob RogerAs announced in March 2016, Rob Roger stepped down from the Board on 30 June 2016 after more than nine years with the business.

On departure, Rob Roger did not receive any cash termination payment or payment in lieu of notice. His outstanding LTIP awards lapsed on departure. He did not receive a bonus in respect of the time working during 2016. The Committee determined that he would retain his outstanding award over 18,057 shares under the Deferred Bonus Plan which is due to vest in 2018, as this relates to performance in 2014. Awards under the Directors’ Share Bonus Plan were treated in accordance with the plan rules and vested in line with other participants and further details are shown on page 86.



Deferred Bonus Plan (DBP)Under the DBP, one-third of the Executive Directors’ annual bonus is deferred for three years. No award was made under the DBP in 2016. The following award over shares was granted under the DBP in 2015 and relates to the 2014 bonus which was disclosed in the 2014 Annual Report and Accounts:

Type of award Date of award Shares awarded Shares exercisable

Simon Gordon Conditional Share Award (in the form of nil-cost options)

1 June 2015 10,922 1 June 2018 to 1 June 2025

The share price used to determine the number of deferred shares subject to award was £3.606, the mid-market closing share price on 29 May 2015.

Awards are deferred for a period of three years and are conditional on continued employment. There are no further performance conditions attaching to these shares although they remain subject to a malus provision.

Long Term Incentive Plan (LTIP)The performance period for awards granted in 2014 ended on 31 December 2016. This award was based on targets linked to EPS and relative TSR performance.

Half of the award was based on TSR performance measured against the constituents of the FTSE 250 (excluding investment trusts). Threshold vesting (25% of the element) required median performance, with outperformance of the upper quartile required for full vesting. Over the period to 31 December 2016, the Company delivered a total shareholder return of +76%. This was well within the upper quartile of the comparator group, and therefore this element of the award is due to vest in full.

The remaining half of the award was based on EPS targets. The 2016 EPS was below the threshold of 20.6 pence, and therefore this element of the award will lapse.

This award will vest during 2017. For the purpose of the single figure table, the value of shares forecast to vest (including accrued dividends) is based on the average share price over the final quarter of 2016.

Awards under the LTIP were granted on 30 March 2016. These awards were granted in the form of nil-cost options over Spire Healthcare Group plc shares, with the number of shares that may vest conditional on performance over the three-year period to 31 December 2018. The maximum award granted to Executive Directors (except for the Executive Chairman who does not receive an award under the terms of his remuneration package) was equivalent to 200% of base salary.

The Committee determined that awards under this plan should be linked to the value created for shareholders over the period, and as a consequence that the awards should continue to be equally weighted as to EPS and relative TSR performance targets. Further details of the performance conditions applying to the 2016 awards are set out below.

EPS – 50% of awardVesting of this element is based on the adjusted EPS outcome for the 2018 financial year.

2018 EPSPercentage of the

element vesting

Less than 20.0 pence 0%

20.0 pence 25%

21.5 pence 50%

23.3 pence or more 100%

Straight-line vesting operates between these points.

Relative TSR – 50% of awardVesting of this element is based on TSR performance measured against the constituents of the FTSE 250 (excluding investment trusts).

TSR performancePercentage of the

element vesting

Below median 0%

Median 25%

Upper quartile 100%

Straight-line vesting operates between these points. Based on relative TSR performance from 1 January 2016 to 31 December 2018.

The following table provides details of all outstanding awards, as at 31 December 2016, made to Executive Directors under the LTIP:

Type of award Date of grant Number of shares Share price Face value at grant1 End of performance period

Simon GordonConditional Share Award (in the form of nil-cost options)

30 September 20142 248,226 £2.823 £700,000 31 December 2016

1 April 2015 193,905 £3.610 £700,000 31 December 2017

30 March 2016 197,628 £3.542 £700,000 31 December 2018

Andrew White 30 March 2016 194,805 £3.542 £690,000 31 December 2018

1 The share price used to determine the number of shares under each award is based on the average of the mid-market quotation at close of business over the last five dealing days prior to the date of grant. The face values at grant are equivalent to 200% of base salary. All awards are subject to EPS and relative TSR performance conditions.

2 As noted above, following the year end 50% of this award is expected to vest during 2017, and the remaining portion will lapse.


STRATEGIC REPORT

GOVERNANCE



Legacy arrangement relating to the period prior to Admission – Directors’ Share Bonus Plan AwardsAs disclosed in the Prospectus, the Directors’ Share Bonus Plan Awards are legacy arrangements that were adopted and operated prior to Admission. These figures have been included in the single-figure table above in the interests of transparency; however, it should be noted that they relate to performance delivered prior to Admission.

Awards were granted to Simon Gordon, Rob Roger and Garry Watts (in recognition of his performance in his pre-Admission role of Executive Chairman) to reflect their contribution to the Company prior to Admission. Details of these awards are set out below. In order to create further alignment with shareholders, these awards were made over shares in the form of nil-cost options and split into two equal tranches, which become exercisable on the first and second anniversary of Admission, respectively.

Although these awards were made in recognition of services provided to the Company prior to Admission and, as such, are not subject to continued employment, the Directors’ Share Bonus Plan Awards only remained exercisable in full if the 90-day average share price prior to the first and second anniversary of Admission was at least 359 pence. If, at the relevant anniversary, the average share price was at or below 224 pence, the number of shares in the relevant tranche, to which the awards relate, would have been reduced by approximately 35%. Where the average share price at the relevant anniversary was between 224 pence and 359 pence, the proportion exercisable would be reduced on a pro rata basis.

As the awards were made in respect of the period prior to Admission, they are not subject to continued employment, except in the case of dismissal for cause, however they were subject to the malus provisions detailed in the Remuneration Policy.

These awards were originally granted on 4 July 2014 and no further awards will be made under this arrangement.

First trancheThe 90-day average share price on the first anniversary of Admission was £3.438 and, as a result, the first tranche of the award (up to 50% of the overall award) vested between the minimum and maximum level in 2015. The balance of the award under the first tranche lapsed.

The following table provides details of the first tranche of the Directors’ Share Bonus Plan Awards:

Type of award

Minimum exercisable award

No. of shares

Maximumexercisable award

No. of shares Shares vested Shares lapsed Shares exercised1

Simon Gordon

Conditional Share Award (in the form of nil-cost options)

133,900 208,900 200,455 8,445 200,455

Rob Roger 245,500 383,000 367,517 15,483 367,517

Garry Watts (in respect of his role as Executive Chairman prior to IPO)

156,250 243,700 233,853 9,847 233,853

1 Simon Gordon, Rob Roger and Garry Watts exercised the first tranche of their awards on 1 April 2016 and sold 94,546, 173,340 and 117,266 respectively to cover income tax and national insurance liabilities, at an average share price of 360.0288 pence.

Second trancheThe 90-day average share price on the second anniversary of Admission was £3.3475 and, as a result, the second tranche of the award (up to 50% of the overall award) vested between the minimum and maximum level during 2016. The balance of the award under the second tranche lapsed.

The following table provides details of the second tranche of the Directors’ Share Bonus Plan Awards:

Type of award

Minimum exercisable award

No. of shares

Maximumexercisable award

No. of shares Shares vested Shares lapsed Shares exercised1

Simon Gordon

Conditional Share Award (in the form of nil-cost options)

133,900 208,900 195,427 13,473 195,427

Rob Roger 245,500 383,000 358,300 24,700 358,300

Garry Watts (in respect of his role as Executive Chairman prior to IPO)

156,250 243,700 227,991 15,709 227,991

1 Rob Roger exercised the second tranche of their awards on 19 August 2016 and sold 168,674 to cover income tax and national insurance liabilities, at an average share price of 343.98 pence. Simon Gordon and Garry Watts exercised the second tranche of their awards on 30 August 2016 and sold 92,174 and 107,533 respectively to cover income tax and national insurance liabilities, at an average share price of 350.4 pence.



Single total figure of remuneration – Non-Executive Directors (audited)The following table sets out the total remuneration for the Non-Executive Directors for the year ended 31 December 2016.

(£000s) Fees Benefits

Total remuneration

2016 2015

Adèle Anderson1 25.6 – 25.6 –

Tony Bourne 60.0 – 60.0 60.0

John Gildersleeve 150.0 – 150.0 150.0

Dame Janet Husband 60.0 – 60.0 60.0

Robert Lerwill 30.0 – 30.0 60.0

Danie Meintjes2 50.0 – 50.0 18.2

Simon Rowlands 50.0 – 50.0 22.0

Total 425.6 – 425.6 370.2

1 Adèle Anderson was appointed a Non-Executive Director and chair of the Company’s Audit and Risk Committee on 28 August 2016.2 As a Non-Executive Director nominated by the principal shareholder, Danie Meintjes’s fees are paid to a subsidiary company within the Mediclinic International PLC group.

Notes to the tableBenefitsReasonable expenses incurred by any Non-Executive Director will be reimbursed by the Company but they have no other contractual entitlement to benefits.

Single total figure of remuneration – Chairman (audited)

Garry Watts1 (as Executive

Chairman)

Garry Watts1

(as Non-Executive Chairman)

Garry Watts1

(as Non-Executive Chairman)

(£000) 2016 2016 2015

Salary/fees 479.0 51.8 257.0

Benefits 2.4 0.5 1.2

Retirement benefits – – –

Annual bonus – – –

Long-term incentives – – –

Sub-total 481.4 52.3 258.2

Legacy arrangement – Directors’ Share Bonus Plan Award2 233.2 – 289.2

Total 714.6 52.3 547.5

1 Garry Watts resumed his previous role of Executive Chairman on 14 March 2016 on a salary of £600,000 per annum. Between 1 January 2016 and 13 March 2016 he acted in the capacity of Non-Executive Chairman on a salary of £257,000 per annum.

2 In accordance with the requirements of the disclosure regulations, the value of the Directors’ Share Bonus Plan Award for 2016 is calculated based on the share price at the date of vesting of £3.196 after part of the performance criteria for the second tranche of this award was met, inclusive of accrued dividend equivalents.

Notes to the tableBenefitsGarry Watts has a contractual entitlement to benefits, which include: private medical insurance for himself and his family; life cover for himself only; annual health assessment for himself and his spouse; and office facilities to enable him to perform his duties as Executive Chairman. Reasonable expenses incurred will be reimbursed by the Company.

ChairmanOn Admission, Garry Watts was appointed as Non-Executive Chairman and, in line with corporate governance guidelines, in that role he did not participate in any future incentive plans.

On 14 March 2016, Garry Watts resumed the role of Executive Chairman, following Rob Roger’s notification to leave the Company. Garry Watts receives an annual salary of £600,000 for this role, but does not receive any pension allowance or LTIP awards.

Although Garry Watts was eligible for a bonus in respect of his executive role, no bonus will be paid for 2016, in line with other Executive Directors.

Details of the Directors’ Share Bonus Plan Awards, relating to performance prior to Admission, are set out on page 86.


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GOVERNANCE



Implementation for 2017The following table summarises how remuneration arrangements will be operated for 2017. Shareholders will note that, for the third year, the maximum opportunity under the incentive plans will also remain unchanged.

Salary and benefits

• Following the year end, the Committee reviewed the base salaries as part of the annual salary review process.• Andrew White’s salary will remain unchanged for 2017. The Committee has determined that, with effect from 1 April 2017,

Simon Gordon’s salary will be increased by 1.5%.2017 salary 2016 salary

Andrew White £365,000 £365,000

Simon Gordon £373,0131 £367,500

• No changes to benefits for 2017 – benefits include private medical insurance, permanent health assurance, income protection, life assurance, an annual health assessment and car allowance. Company contributions to the Executive Directors’ retirement benefits remain at 18% of salary.

1 Effective from 1 April 2017.

Annual bonus The maximum opportunity for Executive Directors (excluding the Executive Chairman) will remain at 150% of salary.

• The performance targets in respect of the 2017 bonus will be based as to 70% on EBITDA, and 30% on a balanced scorecard of strategic targets linked to productivity, customer, quality and staff measures. The detail of targets for the coming year is commercially sensitive; however, the Committee will look to provide disclosure regarding targets and bonus outcomes in next year’s report.

• One-third of any bonus earned will be deferred into shares for three years.

LTIP • Conditional award over shares will be made in 2017 equivalent to 200% of base salary in the form of nil-cost options. • Performance will be measured over the period from 1 January 2017 to 31 December 2019. As noted in the Committee

Chairman’s letter, the 2017 award will include an element based on Operational Excellence.

25% vests 100% vests

TSR v FTSE 250 (excluding investment trusts) (35%) Median1 Upper quartile

0% vests 25% vests 50% vests 100% vests

Adjusted EPS – outcome for 2019 (35%) 18.5p1 20.5p 21.8p 23.2p

Operational Excellence:

• Regulatory Rating (15%)2 n/a85% achieve

‘Good’ or above190% achieve

‘Good’ or above100% achieve

‘Good’ or above

• Net Promotor Score (15%) 821 83 84 85

1 There is no vesting for performance below these levels.2 Vesting for this element would be scaled back (including to nil) if any site is rated as ‘Inadequate’.3 There is straight line vesting between the points shown.4 The Committee may adjust targets or outcomes in certain circumstances (e.g. for changes to accounting standards or material acquisitions). In line with good practice,

the Committee also retains the ability to exercise discretion so that the overall vesting level remains appropriate (e.g to reflect underlying performance).

Shareholding guideline

• Executive Directors (excluding the Executive Chairman) are expected to build up and maintain, over a period of five years, a shareholding equivalent to twice their respective base salaries.

• As at the date of this report, Simon Gordon’s shareholding exceeds the guideline. Andrew White has until 30 June 2021 in order to reach his shareholding requirement.


• The current fees payable to the Non-Executive Directors are shown in the following table.

Role Fee per annum

Deputy Chairman and Senior Independent Director £140,000

Basic fee for other Non-Executive Directors £50,000

Additional fee for chairing a Board committee £10,000

In early 2017, the Board of Directors reviewed and agreed that, with effect from 1 April 2017, the fees will be increased as follows:

• independent Non-Executive Director basic: £55,000; and• Chair of the Clinical Governance and Safety Committee: £15,000.

These are the first increases in Non-Executive Director fees since Admission in 2014.

Executive Chairman

As announced in March 2016, Garry Watts resumed the role of Executive Chairman on 14 March 2016 following Rob Roger’s notification that he intended to leave the Company.

While in the role of Executive Chairman, Garry Watts receives a fee per annum of £600,000 and a cash bonus of up to 150% of salary which will primarily be based on EBITDA performance. He will not receive any pension allowance or LTIP awards for this role.

Role Fee per annum

Executive Chairman £600,000



Statement of directors’ shareholding and share interests (audited)The table below sets out the Directors’ shareholdings in the Company. As noted above, Executive Directors are expected to build up and maintain a holding equivalent to twice their base salary. There is no requirement for Non-Executive Directors to hold shares in the Company.

Shareholding Guidelines

As at 31 December2016

As at 31 December2015

Proportion of shareholding guideline achieved1

Executive Chairman

Garry Watts 503,577 266,532

Executive Directors

Simon Gordon 471,758 262,596 216%

Rob Roger2 712,393 518,216 n/a

Andrew White3 – n/a 0%


Adèle Anderson4 – n/a

Tony Bourne 11,904 11,904

John Gildersleeve 125,761 4,761

Dame Janet Husband 10,231 10,231

Robert Lerwill5 23,809 23,809

Danie Meintjes – –

Simon Rowlands 214,516 214,516

1 Calculated based upon the closing share price on 31 December 2016 of 337.7 pence.2 Rob Roger stepped down from the Board on 30 June 2016 and his share interests are shown as at this date. 3 Andrew White was appointed as an Executive Director on 1 July 2016 and he did not hold any shares as at this date.4 Adèle Anderson was appointed as a Non-Executive Director on 28 July 2016 and she did not hold any shares as at this date.5 Robert Lerwill stepped down from the Board on 30 June 2016 and his share interests are shown as at this date.

There have been no changes to Directors’ shareholdings between 31 December 2016 and the date of this report.

The table below sets out the Directors’ interests in shares of the Company which remain unvested or have vested but are unexercised as at 31 December 2016. Unvested awards are structured as nil-cost options.

Shares

Unvested and subject toperformance conditions1

Unvested and not subjectto performance conditions2

Vested and not subject toperformance conditions

Executive Chairman

Garry Watts – – –

Executive Directors

Simon Gordon 639,759 10,922 –

Rob Roger3 – 18,057 –

Andrew White 194,805 – –


Adèle Anderson – – –

Tony Bourne – – –

Dame Janet Husband – – –

John Gildersleeve – – –

Robert Lerwill – – –

Danie Meintjes – – –

Simon Rowlands – – –

1 Consists of awards granted under the LTIP.2 Consists of shares held through the Deferred Bonus Plan awarded on 1 June 2015 in respect of the bonus paid for the 2014 financial year.3 Rob Roger stepped down from the Board on 30 June 2016 and his interests are shown as at this date.


STRATEGIC REPORT

GOVERNANCE



Letters of appointmentNon-Executive Director Date of appointment Notice period Date of expiry

Adèle Anderson 28 July 2016 2 months No later than 30 June 2019

Tony Bourne 24 June 2014 2 months 26 May 2017

John Gildersleeve 24 June 2014 3 months 23 July 2017

Dame Janet Husband 24 June 2014 2 months 26 May 2017

Danie Meintjes1 20 August 2015 Not applicable 20 August 2018

Simon Rowlands2 24 June 2014 2 months 23 July 2017

1 Pursuant to the relationship agreement dated 22 June 2015 between the Company and Remgro Jersey Limited, under which Remgro Jersey Limited is entitled to nominate for appointment to the Board one Non-Executive Director, Danie Meintjes was appointed to the Board on 20 August 2015. Danie Meintjes is considered to be a non-independent Non-Executive Director.

2 Simon Rowlands appointment was renewed for a further one-year period and a letter of appointment dated 23 July 2016 was issued to him. Due to the senior position Simon Rowlands continues to hold with Cinven Partners he is considered to be a non-independent Non-Executive Director.

Service contractsAndrew White and Simon Gordon, who will both put themselves up for re-election at the annual general meeting to be held on 26 May 2017, are employed under ongoing service contracts with the Group. These contracts do not have a fixed term of appointment. Copies of their service contracts are available to shareholders at the registered office for inspection.

Performance graph The graph below illustrates Spire Healthcare Group plc’s TSR performance against the FTSE 250 (excluding investment trusts) since Admission on 23 July 2014.

200

180

160

140

120

100

60

80

23 July 2014 31 December 2014 31 December 2015 31 December 2016

TSR

(reb

ased

to

100

on A

dmis

sion

)

Spire Healthcare Group plc FTSE 250 (excluding investment trusts)

The table below shows the total remuneration paid to the previous Chief Executive Officer from Admission to the end of 2016. The table also shows details of remuneration relating to the Executive Chairman role for 2016.

2016 2015 2014

Chief Executive’s single figure remuneration (£000s) 320.51 1,095.8 6,223.1

Executive Chairman’s single figure remuneration (£000s) 714.62 – –

Annual bonus payout (% of maximum) 0% 0% 34%

LTIP vesting (% of maximum) n/a n/a n/a

1 Rob Roger stepped down from the Board on 30 June 2016. The figure shows remuneration for the part-year served as Chief Executive Officer.2 Garry Watts served as Non-Executive Chairman from 1 January 2016 to 13 March 2016 and as Executive Chairman from 14 March 2016 onwards. The figure shown is based on Garry Watts’

remuneration in his capacity as Executive Chairman.



Annual change in remunerationThe table below shows the percentage change in remuneration (based on salary, fees, benefits and annual bonus) between 2015 and 2016.

Chief ExecutiveOfficer/Executive

Chairman% change1

Otheremployees

% change

Base salary n/a 2%

Benefits n/a 0.3%

Annual bonus 0% 0%

1 As noted above, Rob Roger stepped down from the Board on 30 June 2016 and Garry Watts resumed the role of Executive Chairman on 14 March 2016. Consequently, full year comparable data is not available. Rob Roger and Garry Watts did not receive any increase to benefits arrangements for 2016.

Relative importance of spend on payThe table below illustrates the year-on-year change in the total remuneration costs for all employees and shareholder distributions.

(£million) 2016 2015 % change

Total remuneration 268.0 253.0 5.93

Distributions to shareholders 14.8 12.4 19.35

Advice provided to the Remuneration CommitteeDuring the course of the year, Deloitte LLP provided external advice to the Committee and its total fees were £19,500 (2015: £33,850). Deloitte LLP has voluntarily signed up to the Remuneration Consultants’ Code of Conduct in relation to executive remuneration consulting during the year. The Committee is comfortable that the Deloitte LLP engagement partner and team that provides remuneration advice to the Committee do not have connections with the Company that may impair their independence. During the year, Deloitte LLP also provided unrelated tax and consultancy services to the Group.

The Executive Chairman, Chief Financial Officer, Group Human Resources Director and Simon Rowlands attended Committee meetings by invitation in order to provide the Committee with additional context. No individual participates in decisions regarding their own remuneration.

Statement of voting at 2016 annual general meeting The following table sets out the voting in respect of the resolution to approve the Company’s 2015 Directors’ Remuneration Report, put to shareholders at the Company’s annual general meeting held on 19 May 2016:

Resolution Votes for % of vote Votes against % of vote Votes withheld

Approve the 2015 Directors’ Remuneration Report 305,605,620 99.02% 3,031,430 0.98% 26,991,857

The Directors were pleased with the response received from shareholders to the resolution proposed. This report on Directors’ remuneration will be put to an advisory vote at the annual general meeting on 26 May 2017. The Directors confirm that this report has been prepared in accordance with the Companies Act 2006 and reflects the provisions of the Large and Medium-sized Companies and Groups (Accounts & Reports) (Amendment) Regulations 2013 and was approved at a meeting of the Directors held on 1 March 2017.

The Company’s Remuneration Policy was approved at its annual general meeting in 2015 and received 99.56% of the vote in favour from shareholders. It is next intended to present the Remuneration Policy to shareholders for approval at the annual general meeting in 2018 unless any alterations are required before then.

Details of all resolutions passed at the annual general meeting held on 19 May 2016 can be found on page 67.

Share prices The market price of a Spire Healthcare Group plc ordinary share at 31 December 2016 was 337.7 pence and the range during the year was 300.1 pence to 400.0 pence.

Tony BourneChair, Remuneration Committee 1 March 2017


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Directors’ Report

reappoint Ernst & Young LLP as auditor. Shareholders will also be asked to authorise the Directors to hold general meetings at 14 clear days’ notice (where this flexibility is merited by the business of the meeting and is thought to be in the interests of shareholders as a whole). Further items of business to be proposed at the annual general meeting are described throughout this Directors’ Report.

DividendsThe Directors recommend the payment of a final dividend in respect of the year ended 31 December 2016 of 2.5 pence (2015: 2.4 pence) per ordinary share making a proposed total dividend for the year of 3.8 pence per share (2015: 3.7 pence). Subject to shareholders approving the recommendation at the annual general meeting, the final dividend will be paid on 27 June 2017 to shareholders on the register as at 2 June 2017.

The Company paid an interim dividend in respect of the year ended 31 December 2016 of 1.3 pence per share on 13 December 2016.

Board of DirectorsThe following changes were made to the Board of Directors during the year;

• Robert Lerwill stepped down from the Board on 27 June 2016;

• Rob Roger stepped down as Chief Executive Officer and left the Board on 30 June 2016;

• Andrew White was appointed an Executive Director on 1 July 2016; and

• Adèle Anderson was appointed an independent Non-Executive Director on 28 July 2016.

The UK Corporate Governance Code provides for all Directors of FTSE companies to stand for election or re-election by shareholders every year. Accordingly, all members of the Board, with the exception of Adèle Anderson and Andrew White, who will stand for election for the first time, will retire and seek re-election at this year’s annual general meeting. Full biographical details of all of the Directors can be found on pages 54 and 55.

Further information on the contractual arrangements of the Executive Directors is given on page 81. The Non-Executive Directors do not have service agreements.

The Directors submit their Annual Report together with the audited financial statements of Spire Healthcare Group plc (the ‘Company’) together with its subsidiaries (the ‘Group’) for the year ended 31 December 2016.

Certain disclosure requirements for inclusion in this Directors’ Report have been incorporated by way of cross reference to the Strategic Report on pages 1 to 53 and the Directors’ Remuneration Report on pages 76 to 91, and should be read in conjunction with this report. The following, included in the Strategic Report, also form part of this report:

• greenhouse gas emissions, which can be found under Corporate social responsibility on pages 46 and 47;

• employees, which can be found under Group Human Resources Director’s review – Our people on pages 42 to 45;

• the Corporate governance statement, set out on pages 60 to 63; and

• Our strategy set out on pages 14 and 15.

A description of the Group’s exposure and management of risks is provided in the Strategic Report on pages 48 to 53.

Information regarding the Company’s charitable donations can be found under Group Human Resources Director’s review – Our people on pages 42 to 45.

Registered officeThe Company’s registered office and principal place of business is 3 Dorset Rise, London EC4Y 8EN.

Annual general meetingThe annual general meeting of Spire Healthcare Group plc will be held at the offices of J.P. Morgan at 60 Victoria Embankment, London EC4Y 0JP on Friday, 26 May 2017 at 11.00am.

At the meeting, resolutions will be proposed to declare a final dividend, to receive the Annual Report and Financial Statements, approve the Directors’ Remuneration Report, elect or re-elect all of the Directors and to

Powers of the DirectorsThe business of the Company is managed by the Directors who may exercise all the powers of the Company, subject to any relevant legislation, any directions given by the Company by passing a special resolution and to the Company’s Articles of Association. The Articles, for example, contain specific provisions concerning the Company’s power to borrow money and issue shares.

Appointment and removal of DirectorsRules relating to the appointment and removal of the Directors are contained within the Company’s Articles of Association.

Director’s indemnities See page 66 in the Corporate governance section.

Amendment of articles of associationThe Company may only make amendments to the Articles of Association of the Company by way of special resolution of the shareholders, in accordance with the Companies Act 2006.

Employees The Group is an equal opportunities employer and is committed to creating an environment which will attract, retain and motivate its people, by creating a working environment in which individuals are able to make best use of their skills, free from discrimination or harassment, and in which all decisions are based on merit. Spire Healthcare employs people who consider themselves to have a disability (a physical or mental impairment which has a substantial and long-term adverse effect on their ability to carry out normal day-to-day activities). Employees who consider themselves to have a disability are under no obligation to inform their employer of this, however, we are fully aware of, and comply with, our obligations in accordance with the relevant provisions of the Equality Act 2010.

We launched the ‘Spire Healthcare discussion channel’, a new communication channel established to provide colleagues, on a regular basis, with audio updates from our leadership team – covering topics which are pertinent to our business; from our strategic direction to operational and people highlights. When appropriate, consultations with employee and union representatives take place.


GOVERNANCE: DIRECTORS’ REPORT

The Group gives full and fair consideration to applications for employment from disabled persons. Should an employee become disabled during their employment with Spire Healthcare, every effort is made to enable them to continue their service with the Group.

Further information on our employees can be found under Group Human Resources Director’s review – Our people on pages 42 to 45.

Political donations and expenditureThe Group made no political donations during the year. Although the Company does not make, and does not intend to make, donations to political parties, within the normal meaning of that expression, the definition of political donations under the Companies Act 2006 is very broad and includes expenses legitimately incurred as part of the process of talking to members of Parliament and opinion formers to ensure that the issues and concerns of the Group are considered and addressed. These activities are not intended to support any political party and the Group’s policy is not to make any donations for political purposes in the normally accepted sense.

A resolution will therefore be proposed at the annual general meeting seeking shareholder approval for the Directors to be given authority to make donations and incur expenditure which might otherwise be caught by the terms of the Companies Act 2006. The authority sought will be limited to a maximum amount of £100,000.

Share capitalAs at the date of this report, Spire Healthcare Group plc had an issued share capital of 401,081,391 ordinary shares of 1 pence each, being the total number of shares with voting rights.

Equiniti Trust (Jersey) Limited, as trustee of the Company’s Employee Benefit Trust, holds 670,559 ordinary shares of 1 pence each (2015: 1,692,242). Further details can be found in note 25 on page 126.

The rights attaching to the shares are set out in the Articles of Association. There are no restrictions on the transfer of ordinary shares in the capital of the Company other than those which may be imposed by law from time-to-time. There are no special control rights in relation to the Company’s shares and the Company is not aware of any agreements between holders of securities that may result in restrictions on the transfer of securities or on voting rights. In accordance with the Disclosure and Transparency Rules, certain employees are required to seek approval prior to dealing in the Company’s shares. The Company’s entire issued ordinary share capital is listed on the premium segment of the Official List of the Financial Conduct Authority and to unconditional trading on the London Stock Exchange plc’s main market for listed securities.

Further information relating to the Company’s issued share capital can be found in note 25 to the Company’s financial statements on page 126.

The Company has made no purchases of its own shares during the year and no shares were acquired by forfeiture or surrender or made subject to a lien or charge. Details of the shares purchased by the Company’s Employee Benefit Trust are shown in note 25 on page 126.

Allot shares and pre-emption rightsShareholders will be asked to renew both the general authority of the Directors to issue shares and to authorise the Directors to issue shares without applying the statutory pre-emption rights. In this regard, the Company will continue to adhere to the provisions in the Pre-emption Group’s Statement of Principles.

Further details on these matters can be found in the 2017 Notice of annual general meeting.

Voting rightsIn a general meeting of the Company, on a show of hands, every member who is present in person or by proxy and entitled to vote shall have one vote. On a poll, every member who is present in person or by proxy shall have one vote for every share of which they are the holder.

Restrictions on votingUnless the Directors otherwise determine, a shareholder shall not be entitled to vote either personally or by proxy:

• if any call or other sum presently payable to the Company in respect of that share remains unpaid; or

• having been duly served with a notice to provide the Company with information under Section 793 of the Companies Act 2006, and has failed to do so within 14 days, for so long as the default continues.

Directors’ interests in sharesThe beneficial interests of the Directors’ and their families in the shares of the Company are detailed on page 89.

During the year, no Director had any material interest in any contract of significance to the Group’s business.

Material interests in sharesAs of 1 March 2017, the Company has been notified by the following investors of their interests in 3% or more of the Company’s issued share capital. These interests were notified to the Company pursuant to Disclosure and Transparency Rule 5:

Shareholder Current %

Mediclinic International PLC 29.90

Woodford Investment Management LLP 14.00

BlackRock, Inc 6.38

The Capital Group Companies, Inc 4.83

GIC Private Limited 3.04


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Compensation for loss of officeThere are no agreements between the Group and its Directors or employees providing for compensation for loss of office or employment that occurs as a result of a change of control.

Disclosures required under listing rule 9.8.4R The above table is included to meet the requirements of Listing Rule section 9.8.4R. The information required to be disclosed by that section, where applicable to the Company, can be located in the Annual Report 2016 at the references set out above.

Events after the reporting periodThere have been no material events affecting the Group or Company since 31 December 2016.

Going concernThe Group is financed by a bank loan facility that matures in 2019. The Directors have considered the Group’s forecasts and projections, and the risks associated with their delivery, and are satisfied that the Group will be able to operate within the covenants imposed by the bank loan facility for the foreseeable future. In relation to available cash resources, the Directors have had regard to both cash at bank and a £100.0 million committed undrawn revolving credit facility. Accordingly, they have adopted the going concern basis in preparing these financial statements.

Significant agreements The following agreements are considered to be significant in terms of their potential impact on the business of the Group as a whole and could alter or terminate on a change of control of the Group:

• the Group’s bank facility agreement contains provisions entitling the counterparties to exercise termination or other rights in the event of a change of control;

• there are a number of contracts which allow the counterparties to alter or terminate those arrangements in the event of a change of control of the Company. These arrangements are commercially sensitive and confidential and their disclosure could be seriously prejudicial to the Group; and

• the Company’s share incentive plans contain provisions relating to a change of control and full details of these plans are provided in the Directors’ Remuneration Report on pages 76 to 91. Outstanding options and awards would normally vest and become exercisable on a change of control, subject to the satisfaction of performance conditions, if applicable, at that time.

The relationship agreement entered into with Mediclinic Jersey Limited (formerly called Remgro Jersey Limited), a subsidiary of Mediclinic International PLC, in June 2015 is deemed a material agreement between the Company and its principal shareholder. The agreement does not include a change of control provision but does terminate upon the earlier of the Company’s ordinary shares ceasing to be listed and traded on the London Stock Exchange’s main market for listed securities and the principal shareholder’s ceasing to be entitled, in aggregate, to exercise or to control the exercise of 15% or more of the votes to be cast on all or substantially all matters of a general meeting of the Company.

Disclosure of information to auditorHaving made enquiries of fellow Directors and of the Company’s auditor, each of the Directors confirms that:

• to the best of their knowledge and belief, there is no relevant audit information of which the Company’s auditor is unaware; and

• they have taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the Company’s auditor is aware of that information.

Reappointment of auditorResolutions for the reappointment of Ernst & Young LLP as the auditor of the Company and to authorise the Directors to determine its remuneration will be proposed at the annual general meeting. Ernst & Young LLP has expressed its willingness to be reappointed.

The Directors’ Report has been approved by the Board and is signed on its behalf by:

Daniel Toner General Counsel and Group Company Secretary 1 March 2017

Information required Location in Annual Report 2016

Amount of interest capitalised Note 10 on page 116

Long-term incentive schemes Directors’ Remuneration Report pages 76 to 91

Equity securities allotted for cash Note 25 on page 126

Parent and subsidiary undertakings Note 17 on page 120

Subsisting significant agreements Page 94

Controlling shareholder relationships Pages 67 and 94


GOVERNANCE: DIRECTORS’ REPORT

• state that the Group’s and Company’s financial statements have complied with IFRS as adopted by the EU, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on a going concern basis, unless it is not appropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions, and disclose, with reasonable accuracy at any time, the Company’s financial position and enable them to ensure compliance with the Companies Act 2006. They are also responsible for safeguarding the Company’s assets and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the Directors, whose names and functions are listed on pages 54 and 55, confirms that:

• to the best of their knowledge, the Consolidated financial statements and the Parent Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Company on a consolidated and individual basis;

• to the best of their knowledge, the Strategic Report and the Directors’ Report include a fair review of the development and performance of the business and the position of the Company on a consolidated and individual basis, together with a description of the principal risks and uncertainties that it faces; and

The Directors are responsible for preparing the Annual Report and Accounts for the year ended 31 December 2016, including the Consolidated financial statements and the Parent Company financial statements, Directors’ Report, including the Directors’ Remuneration Report and the Strategic Report in accordance with applicable law and regulations. Under that law, the Directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Parent Company financial statements in accordance with IFRS, as adopted by the EU.

Company law requires the Directors to prepare such financial statements for each financial year. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company on a consolidated and individual basis, and of the profit or loss of the Company on a consolidated basis for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the EU is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial performance;

• they consider that the Annual Report and Accounts for the year ended 31 December 2016, taken as a whole, is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

By order of the Board.

Garry Watts Executive Chairman 1 March 2017

Simon GordonChief Financial Officer1 March 2017

Statement of Directors’ responsibilities


STRATEGIC REPORT

GOVERNANCE


SHAREHOLDER INFORMATIONGOVERNANCE: STATEMENT OF DIRECTORS’ RESPONSIBILITIES

Documents

Board of Directors - Spire Healthcare Group plc · PDF fileBoard of Directors 1. Garry Watts EC D N Executive Chairman ... EMI Group plc and Gallaher Group plc. John was also a non-executive